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THE MEANING OF PROPERTY 



FIFTH EDITION 



The Meaning of 
Property 



b 

ISAAC H. LlONBERGER, Chairman 

American Credit-Indemnity Company 




1922 

THE STRATFORD CO., Publishers 
BOSTON, MASSACHUSETTS 






v 



Copyrighted 1922 

by 

ISAAC H. LIONBERGER 

of St. Louia 



JUL 26 1922 

©CI.A681244 



"If in some things I dissent from others whose wit, 
industry and judgment I look up at and admire, 
let me not therefore hear presently of ingratitude and 
rashness; for I thank those who have taught me, and 
will ever, but yet dare not think the scope of their 
labor and inquiry was to envy posterity what it could 
add and find out." 

"I do not desire to be equal to those that went be- 
fore, but to have my reasons examined with theirs 
and so much to be given to them as they shall deserve. 
I will have no man addict himself to me, but if I say 
anything right, defend it as truth — non mihi 
cedendum sed veritati." 

— Ben Jonson. 



Preface 

This essay has to do with the unequal distribution 
of wealth and with the discontent which results from 
inequality. It attempts to dispel such discontent 
by explaining the origin and function of property 
and proving that the influences which tend to in- 
equality are beneficial to poor as well as rich. It 
discusses, briefly, the prejudices and errors which 
have induced discontent, and attempts to show what 
injurious consequences are apt to result from ill- 
considered expedients which interfere with the nor- 
mal operation of economic laws. 

I. H. L. 



Introductory 

Property is a natural or artificial institution, as we 
choose to regard it. Those of us who have it rather 
admit than attempt to justify its sanctity. Content 
with its possession, we incline to regard with a cer- 
tain scorn the complaints of those who question the 
justice of a blessing in which they do not share. Yet 
it is unwise to ignore the challenge of discontent. 
The church employs its preachers; every political 
party its advocates ; the law must be vindicated over 
and over again from day to day and generation to 
generation, for what is not understood can not sur- 
vive. A hereditary monarchy was for many cen- 
turies a sacred institution and no man dared to 
question the Divine Right of Kings. Order was 
so necessary to the world that men sanctified him 
who represented it. When in the course of time they 
had by practice become accustomed to obey law, 
kings seemed no longer necessary; yet few nations 
can dispense with them. "A king is a thing men 
have made for quietness sake." He is an idea still 
indispensable to those who do not understand the 
art of government. He avoids frequent elections, 
mitigates party strife and makes possible the transi- 
tion of power from faction to faction without the 
horrors of revolution. Yet today, notwithstanding 



INTRODUCTORY 

its utility, the institution is being dissolved by the 
inconsiderate suspicions of those who can not under- 
stand that utility. Russia destroyed at once king- 
ship and civil order, for having dethroned the king 
there was none to replace him. Factions fought for 
power and anarchy resulted in universal misery. A 
sound argument may be made for the hereditary 
principle, however foolish it may seem to the un- 
thoughtful. 

Property is harder to vindicate than the institu- 
tion of kingship. Its utility is not so obvious to the 
average man. It is produced by the cooperation of 
all, yet one has more and another less. Who can 
justify the millionaire to the pauper? Upon what 
principle does wealth rest? There are no trained 
advocates to answer this question, yet it must be 
answered and so answered as to leave no doubt in 
any honest mind. Political power has passed to the 
majority and with it the right to tax, and with the 
right to tax, the power to confiscate. Men who can 
not perceive the righteousness of another's pros- 
perity are apt to hate it and attempt to destroy it. 
A majority in every democracy is composed of men 
of moderate means or none. Great wealth is there- 
fore odious to them. A new instrument has recently 
been put into their hands. An income tax is an un- 
equal tax ; it does not touch the majority. That such 
a tax will be used to restore a plausible and specious 
equality no man can doubt who observes the growing 



INTRODUCTORY 

burdens put upon the rich. We believe vaguely in 
equality. The dim generalities of the Declaration of 
Independence have long been taught in the schools, 
and as that instrument declares that men are born 
equal, we think they should be so. Yet we can 
nowhere perceive equality. Some are rich and some 
poor, some masters and some servants. It will not 
do to say that men are equal under such circum- 
stances, nor can we justify inequality by affirming 
that many are foolish and some wise, some good and 
many bad. The majority is not as well off as the 
minority, and an argument predicated upon the in- 
feriority of the majority will never find acceptance 
among a turbulent and free people. 

To justify private property and its unequal dis- 
tribution, we must resort to other arguments. We 
must show why and how inequality is indispensable 
to the general welfare — to the poor as well as to the 
rich; and must prove not only the private value and 
general utility of property, but make it evident that 
like every other conventional institution, it is the 
servant and not the master of men. We must allay 
the discontent which we now observe by showing 
that property is not the cause of the evils complained 
of, but that these evils result from other influences, 
which private property tends to mitigate; and 
demonstrate clearly upon what considerations it 
rests, what evils it mitigates, what general good it 
accomplishes and why one should have more and 



INTRODUCTORY 

another less. These are the problems which confront 
us. 

If we begin at the beginning and affirm what no 
man is likely to deny, namely, that goods are indis- 
pensable to the general welfare, — and I mean by 
goods all those wares and commodities which con- 
duce to the comfort and happiness of men — and 
leave aside for the moment all notions of property, 
we are brought face to face with the question, how 
shall these goods be provided? They are not natural 
in the sense that nature produces them ready for 
man's enjoyment. Savages may flourish upon the 
spontaneous offerings of nature, but the civilized 
man cannot pluck food from an uncultivated field 
nor clothe himself with the leaves of the forest; he 
must work in order to live. The wealth we moderns 
need is artificial wealth and must be produced by 
labor. 

Starting with this valid assumption, we are con- 
fronted with the real problem of industry, namely, 
how shall we labor? Should each be left to his own 
resources and be dependent upon himself, or should 
we resort to some contrived scheme of cooperation 
wherein each shall be set to perform that sort of 
labor for which he is best fitted? The latter plan 
seems not only more rational, but more generous. 
It is rational because it sets before each a task suited 
to his capacity, and it is generous because the special 
capacity of each is enabled to promote the welfare 



INTRODUCTORY 

of all. Let us therefore first discuss this plan, which 
for convenience ' sake we will call communism. It is 
unnecessary to define the word. If we leave aside all 
nice discriminations which are likely to confuse, 
communism may be regarded as that scheme of co- 
operation which exacts from every individual the 
sort of productive labor for which he is best fitted, 
in order that a common wealth may be produced as 
efficiently as possible. 



Peoblems of Industry 
Before we approve such a scheme, we should 
take iuto consideration various of its essential 
elements which can not be ignored. Its purpose 
is to produce wealth of all sorts in abundance. In 
order however to accomplish this object, we 
must know what sort of wealth to produce, and 
to this end be acquainted with all the wants of 
the community, devise some plan whereby 
every legitimate want may be satisfied with 
least inconvenience, and at the same time dis- 
cover and in some manner choose from among 
the millions of men concerned, the special mas- 
ters or directors who are competent to judge 
of the capacities and needs of the community; 
so that every man may have his appointed task 
and each his just reward. Such overseers are 
indispensable, for if every man be free to select 
his own task and take from the general store 
whatever he wants, confusion will be inevitable. 
If I work for myself, I will know what to do, 
but if I work for all the rest, I must be told 
what to do. In order that I may have what I 

[i] 



STATE CONTROL 

want from the general stock, that which I need 
must be put within my reach somehow. These 
difficulties are not inconsiderable. 

A great nation composed of millions of men 
can not conveniently choose from so many 
those whose special aptitudes fit them for the 
delicate tasks so to be imposed upon them. The 
masters selected will have great power as well 
as great responsibility. They must be both wise 
and just, for if they blunder the whole scheme 
will fall into confusion. There is a limit to the 
best human capacity. No man can know the pe- 
culiarities, abilities and needs of even a thou- 
sand of his fellow-citizens. We must therefore 
appoint not one but many masters, as many in 
fact as a hundred millions of people need. There 
is in an army an officer for every ten or twenty 
privates. Shall we appoint so many? If so, we 
shall have over the many millions concerned 
millions of masters each of whom will have with 
respect to his fellows power more considerable 
than that required for the management of 
troops; for the civil master must not only 
have power to make another do that which is 

M 



STATE CONTROL 

requisite for the general good but he must be a 
judge of that good and of the fitness of every 
man whom he controls for each task assigned. 
He must moreover be acquainted with the wants 
of all under his charge and see to it that each 
appropriates what he ought to have and no 
more. He must indeed be equal to an even more 
delicate responsibility. All tasks are not alike ; 
some are pleasant and others disagreeable, 
some hard and some easy. These tasks must 
be justly apportioned, and from day to day, so 
that none shall have a grievance. 

If notwithstanding all of these difficulties, 
we do manage somehow to divide the popula- 
tion into convenient groups and to set over 
each a master competent to compel what is 
requisite for the welfare of those composing 
it, there will remain another difficulty which 
ingenuity may find it hard to solve. Not every 
petty group can possess the natural resources 
upon which its prosperity must depend. We 
have farming communities and cities. Those 
who live in towns need food ; the inhabitants of 
the country require a multitude of articles 

[3] 



STATE CONTROL 

made in the cities. How shall the various petty- 
groups be induced to so cooperate as to produce 
in right quantity the articles of which the others 
have need? Will it be necessary to appoint, in 
addition to the corporals and sergeants men- 
tioned, captains, majors and generals as well? 
Or should we first take a census and ascertain 
the number to be served, the needs of each, say 
so many pairs of shoes, so much clothing, so 
much food, so many houses, etc., and then di- 
vide the population into convenient productive 
groups having in view the productive capacity 
of each and the wants of all? 

This latter plan has much to commend it. 
If we know that one hundred millions of people 
need three hundred million pairs of shoes each 
year, nothing should be easier than to establish 
factories having the requisite capacity; set so 
many to the raising of cattle, so many to making 
leather, etc. The plan is not however so simple 
as it seems, for the cattle must be assembled 
and killed, the material for tanning must be 
provided from various parts of the country, the 
leather must be forwarded to the factories and 
the shoes delivered to the consumer. In order 

[4] 



DIFFICULTIES 

to accomplish all of these tasks satisfactorily, 
the shoemaster must control or have some 
authority over the grazing lands, the ploughed 
fields, the forests, and also over the transporta- 
tion systems which he must employ; and so 
must every other master of every other indus- 
try. How shall all of these masters be recon- 
ciled? If we needed shoes and nothing else, the 
problem should be simple enough, but we have 
a thousand needs. Can a thousand masters in- 
dependently control all of the various means, 
materials and instrumentalities upon which 
each must depend? If they can not, how can 
their conflicts be reconciled? If one chooses 
this man to make shoes and another thinks him 
fitter for making cloth, which shall command 
his energy? Moreover, in the event — and such 
an event is not improbable — it transpires that 
after the requisite labor has been set to the pro- 
duction of shoes, there is not enough for other 
commodities, how shall this trouble be over- 
come? We need say ten commodities, but six 
only can be produced : which shall we do with- 
out? Who shall decide? 

[5] 



Tykanny of Communism 
These troubles incident to a communistic sys- 
tem are not fanciful, yet they are inconsiderable 
when we reflect upon the restraints which such 
a system necessarily involves. Masters perhaps 
will flourish, but what of the men? They must 
do this or that as they are told. If they refuse 
they must be punished, else the whole plan 
fails. Will they be free or slaves? If slaves, 
will they be apt to work with energy? If for 
example I dislike my appointed job and prefer 
literature to brick-laying, how and to whom 
shall I show my fitness for one task and un- 
fitness for the other; what tribunal will decide 
where the principles involved are so delicate, 
intangible and perplexing as those which affect 
the merit of a literary performance or the ca- 
pacity of an artist? If the tribunal decide 
against me, must I continue to lay bricks, and 
if I must, will I be apt to lay them well or ill, 
zealously or peevishly? 

We must consider also another necessary 
incident of the communistic scheme no less 
ominous. Not only will labor be enforced but 
the wages received for it will depend upon 

[6] 



FUTILITY 

many delicate, accidental and capricious in- 
fluences which may seriously affect the welfare 
of all workers. Communism assumes that the 
needs of a people can be ascertained by some 
body of officials and that what they deem an 
adequate supply of goods will in fact be satis- 
factory to all men, however they may differ. 
If the Bureau thinks we should be content with 
so many shoes, so much clothing and food, such 
and such living quarters, will all of us gladly 
acquiesce? Will we be content to live not only 
as another shall dictate, but where he shall ap- 
point? These are very grave considerations 
and we may well doubt the wisdom of any 
scheme which involves them. Few men will be 
content to get rid of private property in order 
to substitute for it universal slavery; yet if we 
must have a common property we must resort 
to compulsory labor, to a directed and con- 
trolled industry, to an arbitrary distribution of 
goods, to limited gratifications, to a set wage, 
to a predetermined and arbitrary mode and 
place of living, and to the tyranny of a thous- 
and masters elected by lot, unknown and un- 
tried. 

[7] 



THEORIES 

If, bearing in mind these manifest conse- 
quences of a common property and enforced 
cooperation, we turn aside and attempt to con- 
jecture a more comfortable, less complicated 
and more liberal plan of living, what sort of 
scheme should we devise? What we need is 
an abundant production and just distribution 
of all the goods which contribute to the comfort 
or happiness of millions of individuals differing 
in capacity, taste, inclination and energy; who, 
having various wants and various aspirations, 
wish to be free to do and live as they please 
and where they like, and because they resent 
another's tyranny, should be willing to allow a 
like freedom to their f ellowmen. These are the 
essentials of any plan which is likely to be ap- 
proved by the common opinion of reasonable 
people at this day. How and by whom shall 
such a plan be devised 1 Who among us is com- 
petent for so great an undertaking! What 
human faculty can conceive the wants and 
idiosyncrasies of the millions of his fellow- 
citizens and show to each how he may accom- 
plish his desires? The world has produced 
many great men, yet since the beginning none 

[8] 



A NATURAL SYSTEM 

has been equal to such a task. Plato wrote his 
Republic twenty-five hundred years ago; the 
Greeks were a great and ingenious people, yet 
at no time, under any government free or ty- 
rannous, did they venture to make trial of the 
beautiful but visionary scheme of their great 
philosopher. More devised a utopia for the Eng- 
land of Henry VIII 's time, yet neither his con- 
temporaries nor posterity thought fit to try or 
even consider his dream. A man may seem 
ever so wise, but few of us can be brought to 
believe that another is wise enough to guide the 
industries and control the destinies of all of his 
f ellowmen. Upon what then must we rely ? How 
can we accomplish that which we desire? 

The Free System — Its Evolution 

Perhaps a task which is beyond the capacity 
of any individual, may be within the reach of 
the common sense of mankind guided by experi- 
ment and instructed by experience. The race 
is old; it has tried many experiments; it has 
had a very various experience and after many 
thousands of years we have the results of 
its instruction embodied in the conventional 

[9] 



SPONTANEOUS DEVELOPMENT 

institutions which surround us. The world began 
with savagery and has achieved what we call 
civilization — not suddenly, but gradually. It 
tried an enforced cooperation, a common prop- 
erty, over and over again. Its slow progress 
has been away from such expedients to the free 
system which we now observe. 

Let us examine this system and try to under- 
stand its origin and the forces by which it is 
guided and controlled. If we regard it histori- 
cally, it seems to have been the result of influ- 
ences which began to operate after the dissolu- 
tion of the feudal system. The dark ages fol- 
lowing the downfall of the Koman Empire were 
disturbed by incessant conflict. Some sort of 
law, some compelling authority was required for 
peace. Groups of men found such law and 
authority under one whom they first called chief 
and then king, and they obeyed his will in order 
to avoid anarchy. Such rulers used their 
authority for the general welfare and forced 
some to fight and some to till the ground and 
some to forge armor. Tasks at first arbitrarily 
distributed tended after a time to fall to those 
fit for them, and so a variety of occupations 

[IO] 



EVOLUTION 

resulted from compelling influences. Society 
however was organized for war and not for 
peace, for safety and not for prosperity; and 
so remained for a long time. 

When by reason of the spread of order and 
the gradual consolidation of kingdoms, wars 
became less frequent, the restraints which in- 
cessant conflict necessarily involved were grad- 
ually relaxed and the arbitrary and vague 
services of feudalism were commuted into fixed 
rents or taxes. For centuries all workers had 
been slaves. What one sowed, another reaped ; 
none had a motive to zealous industry; all that 
a man produced in excess of what was necessary 
for his own livelihood was appropriated by the 
lord. As soon as a limit was set to such exac- 
tions and men were permitted to appropriate 
and own the excess, industry began to revive. 
Men worked zealously because they had a mo- 
tive to do so. Freed from the land, they wan- 
dered about in search of work and many of 
them found their way into the towns and be- 
came apprentices to various arts and crafts. 
As the products of labor multiplied, trade be- 
came active and markets were established 

["] 



EVOLUTION 

where the goods and wares made in the towns 
were exchanged for food and raw material; 
and at these markets were revealed the various 
needs of those who mingled together; and so 
goods in demand were advertised and brought 
forward and men were induced to take up use- 
ful, profitable and various tasks. The slavish 
system which compelled the individual to do 
what another deemed necessary for the general 
welfare was succeeded by a free system which 
induced the right service by rewarding it. So 
great a revolution was not however suddenly 
accomplished. For centuries the laws inter- 
fered with its progress. Those in authority 
could not be brought to believe that men could 
be safely emancipated from their superintend- 
ing care. Wages and prices were fixed, trade 
was regulated and restricted, monopolies were 
granted to encourage special industries, and all 
sorts of petty, vexatious and injurious res- 
traints were imposed upon the makers and dis- 
tributors of goods. Only after a long time, and 
rather as the result of the stress than of the 
instruction of experience, did industry become 

[112] 



EVOLUTION 

emancipated and take on that free yet depen- 
dent character which we now observe. 

The industrial no less than the political or- 
ganization of society has therefore been the 
result of vigorous and constantly operating in- 
fluences which in the course of a long time led 
men away from primitive tyranny to present 
liberty. We began with communism and have 
achieved a voluntary cooperation which if it be 
not absolutely free, yet is more free and un- 
restrained than any system which has preceded 
it. If this be true, is it foolish to conclude that 
the common sense of mankind, fortified by the 
instruction of centuries, has rejected com- 
munism and approved a freer and more com- 
fortable system? And ought we not rather to 
defer to this common sense, so fortified, than 
to trust ourselves to the untried and perhaps 
foolish dream of the theoretical philosopher? 
Society has never been foolish collectively. 
Somehow it has managed to survive all sorts of 
vicissitudes and all sorts of trials, and in spite 
of them to achieve a slow but visible progress 
from anarchy to regulated liberty — from pov- 
erty to relative affluence. That it has achieved 

[13] 



SUPERIORITY TO COMMUNISM 

so much should induce us to give to existing 
institutions at least a candid and respectful 
consideration and prevent us from condemning 
them without a hearing. Perhaps our industrial 
system is not as hateful as it seems. 

By comparing it with communism, we dis- 
cover that however imperfect it may be, it is at 
least free from many of the evils which neces- 
sarily result from communism. Men are free 
to do what they please and to live where they 
please, in the sense that they are not compelled 
to do what and live where a master shall require. 
They are not only free to choose their work but 
to choose their gratifications. What they make 
they may spend as, when and where they please 
and not as another shall direct. These advan- 
tages are not inconsiderable. Freedom is worth 
something of itself. It is preferable to tyranny 
even if it result in sacrifices; yet it seems to 
involve none, for never before were men so 
prosperous. They were poor under feudalism; 
communism tended to make them so. They 
began to prosper as soon as they became eman- 
cipated. Today they are better off than ever 
before. These facts invite our consideration. 



PROBLEMS OF FREEDOM 

Whatever defects may be found in onr present 
industrial system — and I frankly admit that 
it is not perfect — it is yet free from many, 
very many evils which communism involves; 
and it has not made us poorer, but richer. Let 
us therefore try to understand it. 

In order to do so, it is necessary to confine 
one's attention to the subject and not permit it 
to stray into less fertile but more pleasant fields. 
Industry concerns itself with the production 
and distribution of wealth. Its object is not 
moral but economic. It does not ignore, but it 
can not be guided by those benevolent and most 
worthy motives of private conduct which result 
in liberality and charity. Concerned with busi- 
ness and with business only, with the produc- 
tion, not the benevolent use of wealth, with 
what men do in order to live and thrive, and 
not with what they ought to do in order that 
others may not suffer; it leaves charity to re- 
ligion and the nobler impulses of men, and con- 
tents itself with providing the means whereby 
those impulses may be gratified. 

If we keep constantly in view this essential 
difference between philanthropy and industry, 

[«5] 



SPONTANEOUS SPECIALIZATION 

many of the irritating suggestions of irrelevant 
criticism will fall by the way and we shall per- 
ceive and appreciate the admirable methods 
whereby a reasoning people in the course of a 
long time has managed to bring about the 
closest harmony between private selfishness 
and general welfare. 

Present System 

Let us now look about without prejudice. 
What do we observe ? The world is very busy. 
Men move to and fro incessantly, each intent 
on his own affairs. A vast majority of them 
find work to do which seems to be satisfactory. 
They differ in character and in capacity, and 
perform various labors. Somehow they have 
managed to divide themselves into convenient 
economic groups. We have farmers and mil- 
lers, miners and blacksmiths, tanners and shoe- 
makers, merchants and carriers, bankers and 
brokers ; and each group seems to contain just 
the right number, no more, no less. We have 
also markets and exchanges where we get what 
we need and dispose of what we have. Some- 
how the right goods are brought forward in 



SELFISHNESS AND SERVICE 

the right quantities, and no want of a luxurious 
people can long remain unsatisfied. Everybody 
seems to be intent on his own affairs ; yet if we 
look more closely we shall observe that each 
works for somebody else. No one makes goods 
for his own use : what he makes he sells, what 
he needs he buys. We serve each other not be- 
cause we must but because we choose to do so, 
yet in the exchange of services we seem to seek 
not another's but our own advantage. If we 
serve, we serve for pay; if we sell, we sell for 
profit. Yet no harm seems to result. By co- 
operation everybody seems to realize some 
advantage for himself as well as for others. 
Lacking direction of an official sort, we never- 
theless spontaneously accomplish all that a com- 
pelled cooperation, cunningly contrived and rig- 
orously enforced, could accomplish. Being free, 
we are yet mutually dependent. We thrive 
together and languish together. No class pros- 
pers at the expense of the other; each shares 
in the prosperity of the other. If we have large 
crops, the prosperity of the farmer is shared 
by every other group ; when the factories thrive, 
the miner flourishes. Somehow, in spite of 

[i7] 



MOTIVES WHICH CONTKOL 

what seems to be an industrial anarchy, we 
manage to live together, to work together and 
to serve each other zealously and efficiently; 
and such irregular, spontaneous, undirected co- 
operation seems to have resulted in greater 
comfort and happiness than was ever before 
known by mankind. These are the facts which 
confront us. To understand them is worth an 
effort. 

The most remarkable feature of this free 
system is that while it seems purely selfish it is 
always cooperative or altruistic. We must first 
understand this anomaly. 

The explanation is obvious if we consider the 
motives and influences by which this free sys- 
tem is guided and controlled. It rests, as should 
every human institution, on human nature ; not 
of one man, not of a governing class, but of the 
average man, his motives, weaknesses, propen- 
sities, needs and capacities. We may assume 
that this average man has wants and wishes to 
gratify them in the easiest way, and that his 
intelligence should prompt him to find that way 
in the course of time. We may also assume that 
by reason of the establishment of civil order 

[18] 



HOW CONTROLLED 

he is not at liberty to prey upon his neighbors, 
as did the feudal baron and his retainers, but 
must get by his own labor what he needs. Such 
a man, so situated, may adopt either of two 
courses : he may make all that he needs, as did 
his savage ancestor, or he may make one thing 
only and get what he needs by trade. Of the 
two, specialization and trade are to be preferred 
because practice tends to skill, and skill to more 
and better goods, and trade to the mutual 
advantage of all craftsmen. Where for ex- 
ample A makes both shoes and hats, he will 
not be apt to be so skillful in both crafts as he 
might become in one. If he can make a hat and 
a pair of shoes in a given time, he ought to be 
able to make either three hats or three pairs 
of shoes in the same time. Where therefore, 
A makes hats only and B shoes only, the joint 
product of both should be three hats and three 
pairs of shoes as against two hats and two 
pairs of shoes. This increment in the output 
which results from specialization may be made 
beneficial to both by the exchange of a hat for a 
pair of shoes ; for after such an exchange each 
will have what he might have independently 

[*9] 



MOTIVES WHICH GUIDE 

produced in the given time and a hat or a pair 
of shoes besides; and such surplus commodity 
may be used for the gratification of other wants. 

Influences Which Control 

In these advantages of specialization and 
trade is to be found the explanation of that 
spontaneous cooperation of free men which fol- 
lowed the relaxation of the feudal system. Every 
man got more for himself by working for others 
than he could get by working for himself alone. 
His motive was not benevolent, he did not wish 
to do good : he was induced to become a special- 
ist by the desire to help himself, and having 
such a motive was compelled as a specialist, in 
order to gratify his own wants, to make what 
another desired. His prosperity depended al- 
ways on the exchange value of his own goods. 
To get by exchange, he had to give in exchange 
something worth what he desired. So men were 
induced to specialize and trade, and such un- 
doubtedly is the explanation of that voluntary 
cooperation of selfish men which we set out to 
consider. 

The motive which I have indicated not only 

[20] 



STRESSES OF ECONOMIC LAW 

induced men to do something useful to their 
fellows, but to do that which each could do best. 
An individual who selected a craft for which he 
was unfit, could not hope to compete in the 
goods market with another of greater capacity 
and equal industry. If for example, I must 
work ten hours in order to produce a certain 
article, and another can make it in half the 
time, he will be able to offer his product for less 
than I, and unless the market be broad enough 
for both, I must yield to him and go into some 
other business. In trade every man has a mo- 
tive to get as much as he can induce another 
to give. He who gives more will therefore al- 
ways be preferred to him who gives less. In 
the case put, I can not compete with another 
and must devote my energies to some craft 
better suited to my capacity. The influence of 
competition is not to be deprecated but encour- 
aged. Society has many wants. Its prosperity 
depends upon the ease with which it may 
gratify them. Every producer of goods is also 
a consumer. Where goods are easily produced 
by one man, and by another with difficulty, the 
former should be encouraged and the latter 

[21] 



ECONOMIC LAWS 

discouraged. We are apt to forget that in trade 
we exchange labor for labor; that the value of 
every man's labor depends on what he can get 
for it; and that what each can get for his own 
must depend upon another's efficiency. To 
decrease the labor cost of an article is to de- 
crease the market price, that is, the price which 
we must pay in labor for it. We therefore 
encourage efficiency, and by the constant stress 
of competition induce free men to do that sort 
of work for which they are best fitted. 

Because these influences were constantly at 
work, the emancipation of labor did not result 
in anarchy. On the contrary free men devised 
under their guidance a better industrial organ- 
ization than was ever before known: one that 
resulted not only in more goods of the right 
sort, but in their just distribution. Under it 
every man, however selfish he might be, had a 
motive to do his best. His share of the goods 
produced by all depended upon his own contri- 
bution to the general stock. 

To these influences and to freedom, we owe 
modern prosperity. Men have become zealous 
in each other's service. They have contrived 

[22] 



SPECIALIZATION 

ingenious machines which assist them in pro- 
duction and have formed themselves into com- 
petitive groups in order by a closer cooperation 
to obtain better results. In these groups specia- 
lization has been carried very far. No one is 
now a shoe-maker. Each makes part of a shoe. 
One cuts leather, another sews, another heels, 
another finishes, and each has the assistance of 
a machine. The result is astonishing. Where 
formerly a man produced in a day one pair of 
shoes, today five men with the aid of machines 
produce not five pairs, but twenty or thirty 
pairs. So it is in every other industry. The 
factory has everywhere supplanted the crafts- 
man, and as a consequence the community has 
more goods than ever before. Every laborer 
produces more by and gets more for his labor. 
This is the explanation of the amazing progress 
of modern industry and of the ease with which 
we satisfy our wants. 

Motive to Industry 

We now approach the subject with which we 
are chiefly concerned. What is the reward which 



FUNCTIONS OF PROPERTY 

has stimulated men to strive so zealously for 
the welfare of others 1 It is property. In prop- 
erty every man finds a recompense proportion- 
ate to his service. Rob him of this reward and 
the whole system crumbles. If he can not pos- 
sess and own what he makes, and freely ex- 
change it for what another makes on terms 
satisfactory to both, he will not work save 
under the lash of compulsion. Liberty and prop- 
erty are justly associated, for without property 
liberty is fruitless. Property lies at the very 
foundation of our political and industrial sys- 
tems. It emancipates us from the lash of the 
overlord, affords a motive and guide to indus- 
try, induces every man to do that sort of work 
for which he is fit, results in the abundant pro- 
duction at least cost of all the various articles 
of which society has need, and tends to that 
cordial and zealous mutual service which we 
now observe. So great is the importance of 
property that we have almost sanctified it. It 
seems a natural right. Christ praised the good 
and faithful servant who increased his own 
store by serving his fellows. Life, liberty and 

[241 



PROPERTY 

property are declared by our Declaration of 
Independence to be among the inalienable 
rights which governments are bound to protect. 
If I make a hoe it is mine by the common opin- 
ion of mankind. 

We allow private property even in land, not 
because the appropriation of a natural resource 
to the exclusive use of any man can be justi- 
fied, but because as practical men we wish the 
land to be made as productive as possible. The 
farmer must somehow be induced to feed not 
only himself but the rest of the community. If 
we say to him, "You must sow what we will 
reap, ' ' he will not be zealous in the performance 
of so unprofitable a service. 

Notwithstanding these considerations, men 
are constantly attacking property. They com- 
plain that it is unequally distributed; that one 
has less because another has more; that the 
rich man has appropriated more than he can 
earn, and that the poor are victims of spolia- 
tion. If these things be true, then all that has 
been said is false. Let us examine critically 
the arguments of these protestants. 

D*5] 



Objections to Property 
I assume that none of them is disposed to 
quarrel with the general proposition that men 
are and of right ought to be entitled to what 
they produce and should be allowed to exchange 
their own goods for goods produced by another. 
The evil complained of, if there be one, must lie 
elsewhere. It can not be found in the mere 
fact that wealth is unequally distributed, for 
one man may be more industrious or skillful or 
saving than his neighbor, and if he produces 
more he should have more. The evolution of 
industry has resulted in many unforseen de- 
rangements and in these we may find the 
germ of the general discontent. One of these 
consequences is the extreme to which we have 
pushed specialization. In order to make as 
much as possible with least effort, we have 
established factories and so distributed the 
various processes of manufacture that today 
no one makes a completed article, that is, an 
article ready for the market. Everything made 
is the product of many workers and it is difficult 
to estimate the contribution of each to its mar- 
ket value. We now solve this difficulty in a 

[26] 



OBJECTIONS TO PROPERTY 

rough way. Goods are made and disposed of 
and the proceeds are distributed among those 
concerned according to a rule which seems to be 
arbitrary and unjust, one receiving wages, an- 
other a salary, another interest, another profits. 
Fair men who do not quarrel with property as 
such, are dissatisfied with the manner in which 
it is distributed among those who cooperate to 
produce it. There are others who complain of 
trade, and insist that it encourages cunning and 
rapacity and results in the enrichment of one 
at the expense of another. Others quarrel with 
usury : money they say is inert and barren and 
produces nothing, yet it receives the lion's 
share. These and like prejudices are too widely 
diffused to be disregarded. Moreover they are 
supported by facts which none can deny. Trade 
does sharpen the wits and some get rich by it 
while many fail. The capitalist may take his 
ease and live in luxury ; the workman, who gets 
least, must toil incessantly. These consequences 
of our free and selfish system provoke resent- 
ment, and lie at the root of the discontent which 
now afflicts us. We can not ignore them. 

[27] 



WAGES 

The Labor Question 
The labor question is hard to understand. 
There are few principles to guide us. We can 
no longer measure the value of an individual's 
service. The old, simple way of ascertaining 
the value of work done by the goods it may be 
exchanged for in the market, is no longer avail- 
able. Where many cooperate to make and one 
sells and distributes the proceeds, it seems to 
lie in his power to give much or little as he 
pleases, and he has a motive to give little. The 
employer is not altogether free, for he can not 
force men to accept less than another will pay; 
but jobs are not easy to find, and a man trained 
to one craft can not always find a vacancy in 
that craft. Moreover, a righteous employer 
who means to be just, can not have his way. 
Every factory must compete with every other, 
and if one pays higher wages than another it 
can not sell at the same price. Besides these 
causes of friction, there is the difference in 
men's capacity: one is a better workman than 
another, yet both get the same pay. The cost 
of goods is predicated upon the whole output of 
the factory, and they are marketed wholesale. 

[28] 



WAGES 

Discrimination in wages is not only resisted by 
the Unions, but is excessively inconvenient. 
Employees are not associated in the manage- 
ment. However wisely and justly affairs may 
be managed, the employee is never sure 
that he is getting his just share. These and like 
influences tend to discontent. 

I will not venture to offer a solution for prob- 
lems which practical men familiar with all the 
facts have tried in vain for centuries to unravel. 
A theoretical solution can have no value. The 
considerations involved are obvious enough, but 
are too complicated and confused to admit of 
definition. A factory is composed of building 
and equipment, proprietor or manager, and 
employees. The fund to be distributed is the 
difference between the cost of goods, labor ex- 
cluded, and the price realized for them in the 
market, less the cost of distribution. Theoreti- 
cally it should be easy to divide such fund into 
interest, profit, and wages, but such a division 
is never possible. Altho the rate of interest 
may be fixed, the employer and employee will 
never agree with respect to the division of the 



WAGES 

rest. Business affairs involve great risks. 
Times are not always prosperous. Upon the 
proprietor fall the losses; out of the fat years 
he must accumulate enough for the lean. The 
success of the enterprise depends in greater 
degree upon his ability than on any other factor. 
He must know where, when and how to buy 
raw material, and where, when and how to sell 
the finished product ; what to make and how to 
make it; the cost of goods and their market 
value. It is hard to estimate the value of such 
capacity : there is no standard by which it may 
be gauged. 

Moreover, wages have a first lien on the 
enterprise. They must be paid whether earned 
or not. What part of the value of the output is 
due to the workman, what part to the efficiency 
of the machine with which he works or the 
peculiar market value of the commodity, it is 
hard to determine. Workmen are not of equal 
capacity : the man who makes a sewing machine 
does not deserve as much as the inventor. Such 
considerations obstruct the application of any 
theoretical rule for the distribution of profits, 
however plausible it may seem. Perhaps the 

[30] 



AN INCIDENT 

following incident of the Eussian revolution 
may serve to show how hard it is to estimate 
the value of managerial capacity. 

A Russian Incident 

An American in charge of a factory which 
employed Russian workmen was called upon 
by a committee of the party momentarily in 
power and asked various details of his busi- 
ness ; namely, what was his salary, how much 
he paid his workmen, etc. He replied that he 
received 37,500 rubles a year, and paid on an 
average 1000 rubles to his employees. He was 
thereupon informed that thereafter his salary 
should be 1000 rubles. When he refused to serve 
for such pay, he was seized by soldiers, forced 
into a wheelbarrow and trundled thro the 
streets behind a cryer who proclaimed that here 
was an American who exacted for himself 37,- 
500 rubles a year and paid his Russian em- 
ployees only 1000. After being subjected to 
much danger and humiliation, he was released 
and discharged. Several weeks later the same 
committee called upon him and requested him 
to resume charge of the factory at his former 

[3i] 



AN INCIDENT 

salary, offering this remarkable explanation: 
"Something has gone wrong. Everybody has 
been busy, but we can not manage to get any 
wages out of the concern. ' ' The American con- 
sented on condition that he should again be 
conducted thro the streets but with the pro- 
clamation that he was the American who had 
taught 2000 Russians how to earn 1000 rubles 
a year. His request was granted. 

Many schemes have been tried which promise 
a reconciliation of employer and employee, but 
none has been successful under all circum- 
stances. Piece work, profit sharing, bonus in 
proportion to output, however fair they may 
seem and however well they may work in 
special instances, sometimes result in bitter 
failure. They must always fail where the wages 
so derived are less than those current, and they 
are apt to fail wherever such wages are more, 
because a customary wage in time becomes a 
vested right, however it may be earned, and dis- 
content can never be satisfied. That there are 
factories without discord is undoubtedly true, 
yet in every such instance we find the explana- 
tion in the special character of the employer 

[32] 



WAGES 

and men associated. A persistent course of fair 
dealing, a generous desire to have men share in 
the prosperity which they have helped to pro- 
mote, a wise, flexible, adaptable policy founded 
upon good faith and guided by intelligence, are 
fruitful of good even tho they can not achieve 
absolute justice. 

Principles Which Control Wages 

If, passing a problem which does not admit 
of merely scientific solution, we turn to the 
consideration of general economic influences 
upon which both wages and profits depend, we 
enter upon a more fruitful field and may per- 
haps discover something which shall tend to 
reassure the doubtful and calm resentment. 

The wages of the cobbler, as I have explained, 
must depend upon the exchange value of the 
goods he produces. He can get for his work 
what it is worth in the open market and he can 
not get more. His prosperity depends upon 
the purchasing power of his shoes. If they will 
purchase much, he thrives; if little, his wages 
are small. 

The shoe factory has replaced the cobbler, 

[33] 



STRESS OF COMPETITION 

but it has not escaped and can not evade the 
economic laws by which he was controlled. 
These laws are inexorable. They compel every 
factory first, to make the right articles ; second, 
to make them well; third, to make them cheap. 
If it makes the wrong articles, it can not find 
a market; if it produces bad goods, or exacts 
more than they are worth, it can not compete 
with another that offers more for less ; its pros- 
perity depends also upon the purchasing power 
of its goods. 

The harsh and at times destructive operation 
of these laws none will incline to deprecate who 
understand that they are protective as well as 
corrective. The welfare of every specialist de- 
pends upon the efficiency of every other special- 
ist. Where all are efficient the purchasing 
power of the goods of each is great ; where any 
is inefficient, its goods are expensive to all the 
rest. If for example, the employees of factory 
A produce many shoes in a given time and the 
employees of factory B produce few clothes in 
the same time, the cost of clothing to the makers 
of shoes will be high ; or — to state the same thing 
in other words — the wages paid by the shoe 

[34] 



WAGES 

factory measured in clothing will be low. This 
is the evil which competition tends to correct. 
It compels every maker of goods to render as 
much as he gets, by encouraging him who offers 
most. Wages must be earned in order that they 
may be realized. The prosperity of every in- 
dustry depends upon the goods produced by 
all. Where all are busy and trade is active, 
wages tend to rise; where production is cur- 
tailed because trade is slack, wages tend to 
fall. 

Wages can not be fixed by the employer. 
They are not paid by him. They must be earned 
by the employee and as earned, whether high or 
low, they must be paid. The gradual increase 
in wages which has marked the last half cen- 
tury has been due to the increasing efficiency 
of industry, and the cupidity of the employers 
has not been able to check it. 

High earned wages can not impair the pros- 
perity of the employer, because they do not 
come out of his pocket. Mr. Ford seems to 
have understood this principle. His minimum 
wage was twice the average, but he saw to it 
that the minimum was earned. He would have 

[35] 



EFFECT OF SCAMP WORK 

no bad workmen about him. He made more for 
himself by paying more to his workmen than 
any other factory. His genius assisted their 
industry, and their zeal his welfare. The or- 
ganization which he provided was the best 
friend of the worker, because it enabled him to 
produce much by his labor. Mr. Ford knew 
how to so organize and equip his establishment 
as to make it the most efficient plant of its kind 
and his workmen the most zealous. Neither 
thrived at the expense of the other. Mr. Ford's 
millions represent not harm done but good — 
good to his associates, good to his employees 
and good to the community. Profits do not 
come out of wages. 

Scamp Work 

Nothing is more injurious to the community 
and to those who compose it than scamp work 
and restricted output. They tend to lower wages 
which zeal and efficiency tend to raise. Where 
the prosperity of the whole community depends 
upon the amount of wealth produced by all, 
everybody should somehow be compelled to 
produce as much as possible, for his own share 

[36] 



BASIS OF WAGES 

will be great or small as the common stock is 
great or small. What each appropriates, he 
must create or get by fair exchange. He must 
offer goods for goods. His enrichment does 
not involve another's impoverishment. He can 
not get something for nothing. If we look about 
us and compare the economic condition of var- 
ious peoples, we shall find that wealth and 
wages depend upon the same influences and ad- 
vance together. A country fertile and rich in 
natural resources is not necessarily prosperous. 
That country thrives, all other things being 
equal, whose industry is equipped with best 
machines and whose population is most intelli- 
gent and most industrious. Wages are highest 
and fortunes are at the same time greatest in 
America, because it contains the most ingenious 
and industrious people in the world. It pro- 
duces most goods and has most to distribute. 
What it pays in wages does not diminish profits, 
and profits do not diminish wages. No one can 
controvert these facts. They prove that the 
spoliation complained of is fanciful. No man 
has ever got rich by paying low wages. A pros- 
perous factory pays higher wages than another. 

[37] 



PRODUCTION AND WAGES 

If special occasion for friction between em- 
ployer and employee arises, it should be met 
wisely and not by violence : with understanding 
of the factors and laws upon which the pros- 
perity of both depend, and a wish to promote 
a common welfare by a just accomodation. The 
trend of wages should be always upward, be- 
cause the efficiency of factories is constantly 
increasing. Today the machinist commands 
the energy of ten men; and his product being 
greater he should receive more than formerly. 
Hereafter, with the progress of the arts, he 
should receive still more. Sufficient goods can 
now be produced to enrich every member of the 
community, and if all classes would set them- 
selves to zealous work and mutual fair dealing, 
discontent should vanish. No man should com- 
plain of another's prosperity, because that 
prosperity rightly understood is proof of ser- 
vices rendered and property earned. 

Wages and Wealth 

Let me illustrate what I mean. There are 
upon a remote island ten men, each of whom 
devotes himself to one of its ten industries. If 

[38] 



TRADE — PROFITS 

all ten work zealously and efficiently there will 
be more goods than where each scamps his 
work. The sum of all the wealth produced by 
all being less, it is obvious that each will get 
less as his distributive share, however the dis- 
tribution may be effected; if more, each will 
get more. The prosperity of all is dependent 
upon the industry of each and the prosperity of 
each is dependent upon the industry of all. 
Wages as we call them must be higher where 
the wealth produced by labor is greater than 
where the wealth produced by labor is less. 

Trade and Traders 

A less difficult question is involved in the 
notion that trade results in the enrichment of 
one trader at the expense of another. It is hard 
to understand the origin and persistence of 
this delusion, yet it is widespread and lies at the 
foundation of much of that prejudice against 
private fortunes which we are now considering. 
Eich men themselves share in the delusion. No 
merchant treats a seller of goods with that cor- 
diality which he shows the buyer. He subcon- 
sciously assumes that he will make money out of 

[39] 



ORIGIN OF PROTECTION 

the buyer and can not make money out of the 
seller. He always means to give in trade less 
than he gets; to buy cheap and sell dear; and 
because he realizes his profits only after hav- 
ing sold, he thinks they are derived from sell- 
ing. Nations are obsessed by the same delu- 
sion. The United States protects its subjects 
against foreign selling. Its statesmen and its 
men of business are afraid of what they call an 
adverse balance of trade, not because it can 
be an evil to have an income in excess of an out- 
go, but because they think it advantageous to 
sell more than they buy. 

If we search for the origin of this blunder, 
we shall discover that it is almost as old as 
human society. The foreign policies of all 
nations were for centuries jealously exclusive 
and in the highest degree injurious to them- 
selves. The mercantile systems of the seven- 
teenth and eighteenth centuries were built upon 
a philosophy which few had the wit to evade. 
Those systems rested upon the assumption that 
money was the most desirable sort of wealth, 
and this assumption proceeded from the notion 
that prosperity could be measured only in 

[40] 



MUTUAL BENEFITS OF TRADE 

money. A trade which involved the export of 
money was therefore deemed injurious. The 
average merchant of today shares in the error 
which dictated the old policies. When money 
is coming in he knows that he is getting better 
off, and when it is going out he thinks he is 
getting worse off. He reckons his profits in 
money, and as those profits are derived im- 
mediately from the buyer, he assumes that 
they are realized at the expense of the buyer. 
As all men are buyers of goods, they regard 
with suspicion those who inflict an assumed 
injury by selling. People generally suspect the 
rich man whose fortune is derived from trade. 
Poor men and dreamers are constantly pro- 
claiming against the iniquity of such ill got 
wealth. We must understand trade in order 
to dispel this illusion. 

Trade is an incident of specialization. Where 
no one uses or consumes what he makes, each 
must resort to trade to gratify his wants. At 
first goods were bartered or exchanged for 
goods. It is obvious that in barter neither 
party is buyer or seller: each is both. If he 

[4i] 



METHODS OF TRADE 

makes in one character, he must lose in the 
other, — and so is no better or worse off as the 
mere result of the exchange. One, of course, 
may give a greater value than he gets, but such 
a result is never contemplated by the other. 
Each thinks he gets an advantage, for the ex- 
change is always made on satisfactory terms. 
If I say that each does derive an advantage, 
yet neither derives it at the expense of the 
other, I will be deemed to have uttered an 
absurdity — yet the paradox is susceptible of 
positive and satisfactory proof. 

It ought to be evident that the mere exchange 
of one commodity for another can not increase 
or decrease the value of either. Where shoes 
are worth as much — that is, cost as much in 
labor — as hats, the cobbler and hatter after 
trading will have as much in value as each had 
before, no more, no less : but — and this is the 
explanation of the anomaly — each will have 
what he wants and to this extent each will have 
derived a distinct advantage from the other — 
not at his expense however, for both are bene- 
fited. 

[42] 



LINCOLN'S BLUNDER 

Buying and Selling 
Now let us assume that the parties use money 
and buy and sell instead of bartering goods. 
Each starts with say five dollars and goods of 
equal value, and each buys from the other what 
he needs for five dollars. Is it not obvious that 
after such dealing each will have precisely what 
he would have had if he had bartered or ex- 
changed one commodity for the other? The 
reader need not be annoyed if he accepts with 
reluctance so plain a demonstration. Lincoln 
seems to have been unable to perceive it. He 
is reported to have said, "If I buy from an 
American an American hat for five dollars, 
America retains the money and the hat; but if 
I buy a hat from an Englishman, England will 
have the money and America the hat only." 
The implication is irresistible that we lose 
money by buying from a foreigner, yet it is 
false and misleading. In the one case, America 
started with five dollars and a hat, and after the 
purchase had been effected, still had the hat and 
the money, no more, no less. In the other case, 
she had five dollars but no hat, and after trad- 
ing, a hat worth five dollars. 

[43] 



TRADE — HOW BENEFICIAL 

We are beguiled by the immediate conse- 
quences of selling and forget that we sell in 
order to buy. No trade can be complete until 
goods shall have been exchanged for goods. 
We do not now barter, because barter is incon- 
venient. A pair of shoes may be worth more 
than a hat, and the difference must be adjusted. 
We use money because it facilitates trade, first 
bartering goods for money of equal value, and 
then money for goods ; but our object is to get 
with the goods we produce the goods we need. 
It matters not therefore, so far as the benefits 
involved are concerned, whether we exchange 
goods for goods immediately or goods for 
money and then money for goods. That an 
unfair advantage is not designed may be in- 
ferred from the common use in trade of the 
word "bar-gain." 

Mutual Profits of Trade 

I have stated a simple case in order that it 
may not confuse. Let us go further into the 
matter and assume that shoes are worth four 
dollars and hats five, and that they are ex- 
changed at these valuations. If each party 

[44] 



TRADE 

starts with his commodity and five dollars, after 
trading the cobbler will have a hat and four 
dollars, and the hatter a pair of shoes and six 
dollars, but each will have in value precisely 
what he started with, altho that value has as- 
sumed another form. The cobbler started with 
five dollars and a pair of shoes worth four 
dollars, or nine dollars in value ; and after trad- 
ing he had four dollars in cash and a hat worth 
five dollars, — that is, nine dollars in value. 
He has neither made nor lost in value, but he 
has what he wants, and this benefit was his 
object. The profits which seem to be derived 
from mere selling are delusive, for each party 
may derive from the same trade the same profit. 
For example, if I value shoes which cost me 
four dollars, at five, and sell to the hatter for 
five, I seem to have made a profit of one dollar ; 
but if the hatter values his hat, which cost four 
dollars, at five and sells it to me at five, he 
also has made a nominal profit of one dollar. 

The principle is obscure because we do not 
exchange goods for goods immediately, but buy 
and sell. Nevertheless the principle still holds, 
for money is but a medium of exchange and a 

[45] 



MEANING OF PROFITS 

measure of the relative values of the goods in- 
volved. When we exchange goods we save 
labor, when we buy and sell we say that we 
make money, but what we make in the one case 
is precisely what we save in the other. For 
example, the trader who makes for $4 and sells 
for $5 and continues to do so until he shall have 
accumulated $20, has in fact saved $20 worth 
of his own labor. The same saving is realized 
by a hatter who makes ten hats, sells five and 
puts five hats worth $4 each in a warehouse. 
Each has accumulated goods, called in the one 
case dollars and in the other case hats. 

Producers as a rule do not accumulate hats or 
shoes, and do accumulate money, for the fol- 
lowing reasons. In the first place, it is more 
convenient to do so. Money is a precious metal 
having great value in small bulk, which may be 
deposited and kept in a safe place without 
charge: whereas goods are bulky and perish- 
able and can not be stored and preserved with- 
out trouble. In the second place, it is safer to 
invest in than money to keep goods. Goods are 
more readily made than disposed of. Produc- 
tion is mechanical, trade depends upon many 

[46] 



PROFITS 

considerations: the desires, wants and means 
of others. To test, to keep in touch with the 
demands of the market, the maker of special 
goods must sell, for unless he does so he can not 
be sure that he is making what another will 
buy. To avoid this uncertainty, traders prefer 
as a rule to sell even before they produce goods, 
Money will buy anything at any time. Its 
market value fluctuates very little and very 
gradually; and it is because money possesses 
these qualities that men prefer to accumulate 
money rather than speculate by accumulating 
goods. Nevertheless, money saved is but the 
proceeds of goods made and converted into a 
more convenient, merchantable sort of com- 
modity; and if we admit that accumulated hats 
are the fruits of the industry and thrift of the 
hatter, then we must admit that the money for 
which hats have been exchanged is also the fruit 
of his industry and thrift and not of another's. 
Men are mistaken who think money got by 
trade is wrung from or got at the cost of the 
buyer. More than charity, trade enriches him 
that gives and him that receives: it is always 

[47] 



ILLUSTRATION 

advantageous for all engaged in it — buyer and 
seller, seller and buyer. 

Perhaps the problem will be simplified if we 
take a broader view of trade than is afforded 
by a single transaction. A diversified industry 
engages say one hundred men in as many dis- 
tinct occupations, each of whom depends upon 
the rest for the gratification of his wants. In 
such case each must sell ninety-nine times and 
buy ninety-nine times. If every sale is made 
at a profit, every purchase must be made at a 
loss, for after it is all over the quantity of goods 
has been neither increased nor diminished. 
Each worker contributes one sort of goods and 
gets ninety-nine others of equal value. He gets 
out in value as much as he put in — no more, no 
less. The farmers of Kansas exchange wheat 
for various articles made in New England, and 
both sections are better off, but neither at the 
expense of the other. 

I will not deny that trade can be less advanta- 
geous to one party than to the other. It is 
always hard to precisely measure the values 
involved, yet in the nature of things this diffi- 
culty is unavoidable. An article is worth to me 

[48] 



BAD TRADING 

what I am willing to give for it, altho another 
may be willing to give more or less. If one 
makes a bad bargain, he is the victim not of 
trade bnt of bad trading. Certainly mere trad- 
ing should not be regarded as the cause of the 
unjust enrichment of which men complain. Nor- 
mally conducted, as it must be in the long run, 
it results in benefits to both parties. Men be- 
come rich by reason not of what they carry out 
of it but by reason of what they carry into it. 
Those who have more to exchange will always 
be better off than those who have less, and to 
this consequence of trade none should object. 

Unprofitable Trade 

Heretofore I have confined myself to the 
simplest sort of trade, namely that which is 
carried on between the producers of various 
commodities. Trade however is never so 
simple. Consumers of goods never meet face to 
face with producers of what they themselves 
need. The cobbler who needs beef may find it 
hard to discover a butcher who needs shoes. 
To avoid this inconvenience, money was in- 
vented. But money does not avoid all the 

[49] 



COMPETITION 

inconveniences of trade. It may be hard to find 
a buyer for goods. The maker is as a rule too 
busy to undertake this task, and it is therefore 
entrusted to one who makes a business of trade. 
The merchant buys from the producer and sells 
to the consumer ; and as his service is useful to 
both, he is allowed what is called a profit for 
performing it. 

Not all merchants get rich, but some of them 
do. Why! Is it not because those who render 
a better or greater service get more than the 
rest ? The man who buys corn in Massachusetts 
for sale in Kansas, will not do as well as he 
who buys corn in Kansas for sale in Massachu- 
setts. Merchandising is a science which requires 
ability, experience and resources. Of those 
who undertake it, few are what is called suc- 
cessful, and because many fail we are apt to 
assume that they are the victims of those who 
succeed. 

Usefulness of Competition 

Disregarding for a moment the welfare of 
the individual, what does the welfare of many 
men engaged in various occupations require? 

[50] 



COMPETITION 

Each makes one thing, and that thing must 
somehow be exchanged on fair terms for every 
thing which he needs. If he gets a fair price 
for his own commodity and pays a fair price 
for another's, he is as prosperous as he de- 
serves ; but if he gets little and pays much, he 
is the victim of another's rapacity. The mer- 
chant or trader helps him to get a fair price 
and protects him against paying an unfair price 
by buying in a cheap market and selling in a 
dear. He who achieves that service accomp- 
lishes it in competition with others having the 
same object. Much depends upon him. If he 
buys where goods are dear and sells where they 
are cheap, has he not hurt both sections? Has 
he not made harder to get what was already 
hard to get, and made more abundant that which 
was already abundant? Who, under such cir- 
cumstances, is better off as the result of his 
intervention? If on the other hand he buys 
corn in Kansas and sells it in Massachusetts, 
has he not done good to both sections by ena- 
bling one to dispose of what it has to sell and 
the other to get what it wants ? 

Simple as this service seems, all men are not 

[6i] 



ON WHAT PROFITS DEPEND 

equally competent to perform it, and a shrewd 
trader will always drive out a foolish one. No 
one should complain of such competition. It 
is called the life of trade, and it is : it tends to 
confine trade to those who understand it and 
render a service by conducting it. If we assume 
that the successful trader has rendered this 
service, his intervention is helpful to producers 
and consumers. He has hurt neither. His pro- 
fit does not come out of either. Corn in Kansas 
is worth so much, in Massachusetts so much 
more. To buy at its worth in Kansas and sell 
at its worth in Massachusetts does not hurt 
anybody. If the merchant did not buy in 
Kansas, wheat would be worth less there, and 
if he did not sell in Massachusetts, wheat would 
be worth more there. The difference between 
the local values affords a legitimate profit to 
the merchant. 

If this service were easy, all men would thrive 
by trade, yet they do not: neither should they. 
Consumers encourage him who sells for least; 
producers, him who pays most : between the two 
there is room for ability — for that sort of fac- 
ulty which knows how to pay more and sell for 

[52] 



GREAT FORTUNES 

less than another, that is, to help both pro- 
ducer and consumer. Underselling should not 
be deprecated, save in those rare instances 
where goods are sold for less than they are 
worth in cut-throat competition; and in such 
instances the loss falls on the merchant, not the 
consumer. The profits of a trader show his 
usefulness, and none should withhold from him 
what he has honestly earned. 

Competition and Success 

Great profits which go to swell great fortunes 
sometimes alarm us, but only because we do not 
understand their origin. A. T. Stewart made a 
vast fortune by selling goods cheap which had 
been dear, and at the same time was the best 
buyer in the market. He diminished the cost 
of distribution. 

People are mistaken who deprecate the en- 
richment of traders. If good ones did not thrive 
there would be no inducement to promote the 
general welfare by discovering and satisfying 
on favorable terms the various needs of various 
members of the community. We should rather 
admire than contemn success in trade. Such 

[53] 



USURY 

success is never won by hurting — it is always 
the result of helping. The merchant prince is 
a benefactor of mankind and none should envy 
his prosperity. 

Usury, Its Justification 

I have discussed that sort of enrichment 
which results from trade and trading, and dis- 
covered in neither just cause for suspicion or 
resentment. It remains to discuss interest, or 
that increment which capital demands of the 
borrower. By reason of interest, men are 
enabled to live in luxury who seem to do noth- 
ing. Is it right that they should be permitted 
to do so? 

Usury has always been odious. Christ drove 
the money changers from the temple. For many 
centuries the Church forbade it. During long 
ages it was deemed hurtful and hateful by all 
good men. "The usurer is the great Sabbath 
breaker; his plough goeth on Sunday' ' contains 
a general and persistent opinion. Men were 
persecuted because they were usurers. We 
have today in the statutes of many states severe 
restraints upon the rates of interest that may 

[54] 



CAPITAL 

be charged. If we search for the origin of this 
opprobrium, we shall find that it proceeded 
from the just resentment of men. Usury was 
an evil for many centuries. Men in distress 
borrowed so much, spent it and were required 
to pay more. The improvident heir resorted to 
the lender and lost his heritage, and that trade 
became hateful which involved the ruin of so 
many. 

Value of Capital 

Today however these evils are confined to 
very narrow dimensions. Men no longer bor- 
row in order to spend but in order to make 
money. We still justly condemn the money 
shark who afflicts the poor, but we should not 
despise a use of capital which enriches the bor- 
rower and the community. What is capital? 
Capital is saved wealth, and since all wealth is 
in a sense the product of labor, capital may 
properly be regarded as accumulated labor. As 
we use the word however, we mean by capital 
that part of saved wealth which is used in the 
production or distribution of other wealth. 
Every tool is capital. So is a machine, a factory, 

[55] 



EARNING POWER OF CAPITAL 

the raw material required and the wages 
paid pending the production and distribution of 
goods. Railroads, canals, highways and ships 
are capital, and all the innumerable instrumen- 
talities of commerce. The function of capital 
is to help the laborer. A mechanical knitter 
will do the work of 7000 hands. Machines of 
various sorts increase the efficiency of the la- 
borer from five to twenty-fold. A century ago 
it cost 26 cents to transport overland one ton 
one mile; today the same quantity is carried 
the same distance for half a cent. Our present 
prosperity is in larger measure due to the gen- 
eral and wise use of capital than to any other 
influence, and for this reason it is indispensable 
to the general welfare that somehow a constant 
and adequate supply be provided. There are 
but two conceivable ways in which it can be 
provided : the state may furnish it, or its accum- 
ulation may be left to individuals. How can the 
state provide it? 

The state as we know it is not a maker but 
a spender of wealth: it does not support in- 
dustry, but is supported by it. If it needs 
capital it must tax the property of its citizens. 

[56] 



ACCUMULATION OF CAPITAL 

Can we rely on such a source for all the capital 
needed for the development of a great country ? 
Let us assume that a law is passed which ap- 
propriates all private fortunes in excess of that 
modest competence which the majority of our 
fellow-citizens deem sufficient ; and further, that 
as a consequence of such law, all of the fac- 
tories and plants and transportation systems 
of the country pass into the hands of office 
holders. How long will such capital last? If 
we allow it usury, the people are no better off, 
since they must pay. If we deny it usury, we 
must replace it. Capital is not immortal. Tools, 
machines, factories and railroads wear out. 
Are they apt to depreciate more or less rapidly 
under political control? If they do depreciate, 
how can the cost of renewals, enlargements and 
improvements be derived? Additional exac- 
tions from the people are impossible in the 
case assumed, without impairment of that mod- 
erate competence which we are willing to allow. 
If nevertheless we continue to appropriate 
private property, how long will the industrious 
part of the community continue to save what 

[57] 



CAPITAL 

they can not enjoy? The blight of the feudal 
system lay in its undefined exactions. No man 
had a motive to work so long as another had 
the power to appropriate the fruits of his labor. 
If we revert to the old plan and say to men, 
you may have so much and no more, is it likely 
that they will labor zealously after their allow- 
ance shall have been won ? None but a dreamer, 
ignorant of history and of human nature, would 
venture to predicate an economic system on so 
false a foundation. 

If we do not resort to taxation, we must so 
operate the instrumentalities appropriated as 
to provide for their maintenance and immor- 
tality. In this event, the factories and railroads 
must be operated at a profit and the com- 
munity will be no better off than at present. 
Will it be as well off? I have already discussed 
the dangers and inconveniences of communism 
and it is unnecessary to reiterate them. Public 
control is never efficient. Politicians are not 
good captains of industry. An enforced labor 
is a sluggish labor. Where no man has a motive 
to economy, little will be saved. A monopoly 

[58] 



CAPITAL AND WORK 

is apt to be careless of efficiency, for where 
wages depend upon political influence and the 
public must pay, every job will become a 
sinecure. The appropriation by the government 
of the railroads in 1917 was followed by an im- 
mediate increase of from 25% to 33% in the 
charge for transportation, and a corresponding 
increase in the wages paid. A reasonable 
nation, however generous its prosperity, should 
hesitate to embark upon so hazardous a plan, 
save as a desperate expedient to remedy a des- 
perate evil. We need capital and should prefer 
to provide it in some other manner. It is now 
provided abundantly. The government has 
borrowed billions for war and other billions will 
be forthcoming. In times of peace, capital seeks 
investment. States and cities get what they 
need at 3 x /2% or 4%. Private capital has built 
the railroads, equipped the farmers with cun- 
ningly contrived machines, established lines of 
communication from ocean to ocean, and 
financed the industry and trade of this country 
so advantageously that none can compare with 
it in affluence and power. 

[59] 



CAPITAL 

How Capital Provided 

If it be asked how so great a sum has been 
provided, I answer, by the industry and provi- 
dence of millions of people, each of whom has 
a motive to save. We have learned how to 
incorporate capital and can make a little profit- 
able. Small sums derived from petty savings 
furnish the great sums required for great un- 
dertakings. We pay interest on savings, and 
get all the capital we need by allowing it earn- 
ing power. What harm has followed! Who is 
hurt by the lender's gain? Not the borrower. 
If I lend a man a plow, can he not afford to 
pay me for its hire ? The great borrowers are 
the soulless corporations created for profit and 
nothing else. The workman to whom I lend a 
machine increases his output five or ten fold. 
Do I wrong him if I ask a small part of his 
profit for the use of my property? 

Does usury impair the general welfare? How 
can it? It tends to induce the accumulation of 
the capital required for efficient production and 
distribution, and results in more goods at less 
cost and cheap distribution. The merchant who 
borrows can sell more cheaply than he who 

[60] 



CAPITAL AND USURY 

does not. Trade is a hazardous undertaking 
and the profits realized should recompense the 
merchant for his services and risk. If we assume 
that 10% is a fair return on money invested, 
the merchant who uses $100,000 of his own must 
make $10,000. If however another has but 
$50,000 and borrows $50,000 at 5%, he need 
earn but $7,500 on the same sales, and can 
therefore undersell. Usury as we now under- 
stand it is paid neither by the borrower nor 
the community and can not hurt either. If 1 
make by the work of my hands in the course 
of a given time $1000 and save $500 which I 
invest in a machine to enable me to make twice 
as much in the same time, my increased output 
serves to increase the general stock of goods 
or make them more abundant. If I lend my 
machine to another exacting Vk or less of the 
benefit he will derive from its use, will my 
enrichment be the result of his work or his 
enrichment be the result of my help! These 
considerations can not be ignored. The pros- 
perity of a community depends upon the ac- 
cumulation and abundant supply of capital. 

[6i] 



USURY 

The usury exacted can not hurt either the bor- 
rower or the community: it affords a motive 
to do what otherwise could not be accomplished. 
It encourages thrift and rewards self-denial. 
No evil can result from it. The capitalist can 
consume so much and no more. What he has 
in excess of his wants, he must use beneficially 
or waste profligately. To allow him usury is 
to encourage him to do good. None but those 
ignorant of affairs would venture to prohibit 
so fruitful a source of good. 

Usury does sometimes result in the accumula- 
tion of great fortunes, but such fortunes should 
not be feared. It is an old maxim that ' ' riches 
take unto themselves wings and depart. " He 
who makes a bad use of capital, that is a use 
which is not profitable to the community, can 
not retain it. There are but three generations 
between shirt-sleeves and shirt-sleeves, because 
it requires ability to manage a fortune. Few 
fortunes are inherited and transmitted unim- 
paired. If we consider the consequences of 
folly, extravagance, the distribution of estates, 
and the catastrophies which from time to time 

[62] 



CAUSES OP PROSPERITY 

sweep over the country, we will not be apt to 
fear plutocracy. New men now and always have 
controlled business affairs. In spite of its 
power, capital must depend upon ability, and 
ability will in time appropriate capital. Happy 
is that country which succeeds in inducing men 
to provide capital and compelling them to make 
an advantageous use of it. America is today 
more prosperous than Russia not because its 
natural resources are greater but because it has 
more capital, its laws are wiser, its industrial 
system is more free, its men are more indus- 
trious and more intelligent and its property is 
more secure. If we revert to the old tyranny 
and deny men a motive to thrift, we shall sink 
into the old poverty. The poor man should 
never complain that the rich man is his enemy. 
Capital is the best friend of poverty. It fortifies 
energy. Labor is indispensable to capital. Each 
is dependent upon the other and the mastery is 
with neither. Each helps the other, — capital 
more than labor: it affords the tool, the place 
to work, the increased product, the greater part 
of the wages earned. 

[63] 



RICHES 

Unjust Enrichment 

What then becomes of the objections to 
private property which we set out to consider? 
"What a man makes is his by the common opinion 
of mankind. He can make more by specializa- 
tion than by attempting all thing's. Where 
labor is divided, trade is indispensable. Trade 
is advantageous to both buyer and seller. The 
merchant who facilitates it is worthy of his 
hire. Capital is requisite to industry — it in- 
creases the products of labor and cheapens the 
cost of distribution. Usury induces the accumu- 
lation of capital. Its payment does not hurt 
the borrower; riches must be made of use to 
the community. Except they be usefully em- 
ployed they can not be retained. These are the 
general considerations which justify private 
property : common sense, experience, its private 
and general utility, its origin in service and 
self-denial, the spur it affords to industry, and 
above all the evils which it precludes. 

I can not deny that there are bad ways of 
getting rich, nor that wealth may be and fre- 
quently is ill used; but these subjects I can not 
discuss. The ways of the criminal and specu- 

[64] 



IMPEDIMENTS TO PROSPERITY 

lator are fugitive and various. I have con- 
sidered only that normal sort of conduct which 
we most properly attribute to just men who 
thrive by helping their fellows, and that sort 
of enrichment which is the just result of that 
service. If the argument fails it is because it 
is difficult to make an argument which shall be 
satisfactory to those who lack property. What 
men can not have for themselves they are re- 
luctant to allow to others. Reason has very little 
to do with the matter. If we envy a man of 
greater ability, it is natural to deny his super- 
iority; if we have less by deserving less, we 
can still question his right to more. The dis- 
satisfied part of the community will ever find 
an excuse in an accusation. "Believe not much 
them that seem to despise property, for they 
despise it that despair of it," said Lord Bacon. 

Obstacles to Prosperity 

I have ventured upon the foregoing apology 
not alone to justify private property to those 
who are ignorant of the considerations upon 
which it rests, but by the display of those con- 
siderations to make evident certain blunders 

[65] 



DISCONTENT 

and follies commonly committed which tend, De- 
restricting or restraining the free play of eco- 
nomic laws, to impair the general welfare. The 
most prosperous among us, not content with 
the natural and just rewards of energy and 
service, are apt at times to pervert their efforts 
to unworthy uses and strive to get without giv- 
ing and win without deserving. Combinations 
in restraint of trade, labor conspiracies, pro- 
tective laws and burdensome taxes are the 
effects of prejudice or cupidity and tend not 
only to serious material loss but to general dis- 
satisfaction and unrest. Forgetting their mutual 
dependence and the actual interest of every- 
body in the efficiency and prosperity of his 
neighbor, class is arrayed against class, indus- 
try against industry, community against com- 
munity and nation against nation. Labor unions 
restrict out-put under the delusion that such 
restriction will result in giving employment 
to more men. Manufacturers combine to keep 
up prices. Communities are jealous of each 
other's goods, and attempt to excite a narrow 
and local feeling. Nations surround themselves 
by obstacles to trade which they call protective 

[66] 



' LABOR UNIONS 

barriers. Taxes are imposed in hate. These 
and like wrongs are perpetrated in good faith 
by ignorant men. Let us examine the preju- 
dices which prompt them and the effects which 
follow. 

Labor Unions 

The labor union seems to be of opinion that 
short hours, scamp work and restricted out-put 
tend to raise wages. This delusion is very old. 
It originated in China thousands of years ago, 
and still dominates that unhappy country. The 
Chinese have always been jealous of innova- 
tions and improvements. They hold, almost as 
an article of religion, that every labor saving 
device costs a man a job. As a consequence, 
twenty men are required to pull one up a river. 
Steam is excluded. Freight is carried by men. 
Goods are made by hand. In consequence of 
these follies, Chinese labor is the worst paid 
in the world. This fact, which none can deny, 
should arrest the attention of those who are 
now obsessed by a like delusion. Wages depend 
upon the wealth produced by labor. Where ten 
men are employed to do the work of one, the 

[67] 



BLUNDERS 

proper wage of one must be divided among 
ten. The workman is reluctant to admit that 
he must subsist upon what he himself produces. 
He does not know that if he confederates to 
produce little, he conspires against his own 
interest. The economic law which I have en- 
deavored to explain exacts of every man that 
he shall contribute to the general stock of goods 
as much as he derives from it. If an individual 
evades the law by some hocus pocus, he is a 
parasite deriving his subsistence from another 's 
effort. If he contributes no more than he gets, 
then when his contribution is small his wages 
must be small. 

The Case or The Cloth Weavers 

An illustration of the operation of this law 
is afforded by the pathetic consequences of the 
introduction of cloth making machinery into 
Lancaster in the early part of the 19th century. 
Prior to its introduction, cloth had been made 
on hand looms, and thousands of people were 
employed in such work. The immediate effect 
of the use of machinery was to deprive every 
hand-loomer of his livelihood. That under such 

[68] 



BLUNDERS 

circumstances they should have hated and 
attempted to destroy the machine was natural 
but unfortunate. After years of bitter strife 
and sorrow, they were compelled to submit — 
with this remarkable result, that the average 
wage of the district increased three-fold: as 
soon as they began to produce more, they got 
more. The propensity to create jobs by slack 
work is no less foolish than the opposition to 
machinery. We divided the tasks of industry 
in order to increase its output. To now restrict 
the output by slack work, is to revert to the 
old poverty. It is sometimes hard to discover 
the operation of the law in the immediate con- 
sequences of job-creating conspiracies. A 
brick-layer formerly laid 1200 bricks a day; he 
is now permitted to lay no more than 700. 
Wages were then $3.00 a day and are now $6.00 
more. How can the law be reconciled with the 
fact? 

The explanation is simple. The competitive 
law which controls those engaged in the pro- 
duction and distribution of goods intended for 
consumption, does not operate on the brick- 
layer, and his wages seem to be independent of 

[69] 



BLUNDERS 

the service rendered by him. Yet he is not 
emancipated from all control, for if he exacts 
more than another can earn he must make way 
for the other, unless by a combination he can 
sustain his unjust exaction. For this reason 
there is usually behind every union composed 
of brick-layers, railroad men and others of like 
class, a sinister threat of violence. Their 
rapacity rests upon violence, implicated if not 
practiced. No man should get more for work 
than it is worth ; for if he succeeds in doing so, 
he thrives at somebody's else expense. Monop- 
olies of all sorts are injurious. They levy toll 
on industry and derive their profits from spolia- 
tion. The constant and conscious object of 
every one engaged in industry should be to do 
his best, for that way lies prosperity. We are 
apt to forget that wages are great or small, not 
as they are high or low measured in money but 
as their purchasing power is great or small. A 
man may receive $10 a day and be able to pur- 
chase but $2 worth of goods. "When we sell 
and buy, we exchange labor for labor, and none 
can have an interest in getting little for his 
own. No one can get $10 worth of work for 

[7o] 



RESTRAINTS OF TRADE 

work worth $2, by any fair bargaining. To 
attempt such spoliation is to deserve disaster. 
Where a man gets five days wages for four 
day's work, somebody pays for four days work 
five days wages, and if many are required to 
submit to such wrong, the industrial system is 
out of joint. Men who earn five dollars a day 
by honest labor, can not long afford to pay 
ten dollars a day for dishonest labor. 

Teade Conspieacies 

Conspiracies between manufacturers to keep 
up prices are equally injurious and equally 
wrong. They tend to make goods expensive or 
hard to get, and disturb that equal, fair and 
just distribution which should be the aim of all 
honest men. High prices have always been 
alluring. A moment's reflection should dis- 
cover how specious they are. To sell for a high 
price is to buy for a high price. The object of 
trade is the exchange of goods for goods; and 
their market values, however conventionally 
measured, can not affect their intrinsic values. 
If a pair of shoes is worth a hat, it matters 
not whether these commodities be valued for 

[7i] 



EFFECTS OF 

exchange at $2 or $20. People attribute pros- 
perity to high prices, because advancing prices 
always attend an improvement in business. 
Yet the improvement can not be the effect of 
the advance. A community which finds it 
harder from day to day to satisfy its wants is 
not progressive but decadent. Prosperity is 
the result of a contrary tendency. When goods 
are easily produced and readily disposed of, 
business is good. It neither hurts nor helps 
that money values advance; always provided 
they advance equally. Where however, owing 
to combinations, certain goods advance and 
others remain stationary, the disparity must 
always result in the arrest of trade. What is 
hurtful to the community can not in the long 
run bring profit to the wrongdoer. The crises 
which from time to time disturb all commercial 
affairs are due to a growing disparity between 
the prices demanded and the means of pay- 
ment. There is a price which the average man 
can not pay. When he ceases to buy, the de- 
mand for goods falls off and industry lan- 
guishes; and when as a result of such stress 
prices are reduced, the demand is renewed and 

[72] 



FUTILITY OF REGULATIONS 

business revives. Conspiracies in restraint of 
trade temporarily result in unjust enrichment; 
yet in the long run cheapness is more profitable 
than clearness — service than spoliation. 

Wages, Pkices and Law 

All efforts to fix prices or wages arbitrarily 
are doomed to ultimate failure. They must fail 
because they result always in wrong to some 
class of the community, and there is a limit set 
by immutable laws to wrong doing. The law 
of supply and demand can not be repealed. Since 
the beginning, ignorant men have been striving 
to evade it — never successfully. In Elizabeth's 
time wages were fixed. During the Dark Ages 
and down to our own time many, many attempts 
were made to fix prices. Today we are attempt- 
ing to do what our ancestors tried to accom- 
plish by valuers in the thirteenth and fourteenth 
centuries. They tried and we try to establish 
what is thought to be a justum pretium for 
goods. The result of such interference is always 
uncertainty, confusion — wrong; and always 
will be. No man's intelligence is equal to such 
a task. To fix a price too low is to give a man 

[73] 



PRICE CONTROL 

too little for his labor; to fix it too high is to 
hurt the purchaser. Benevolence can not esti- 
mate the relative values involved. What I, 
having nothing to sell, think of the value of 
another's property, may be less than he can get 
for it, or more than he can get. It is worth in 
exchange what another will give for it. 

In the sixteenth century there were three 
years of drought in England, and to alleviate 
the general distress, the King sent his commis- 
sioners into every county with instructions to 
inventory and value all farm products and com- 
pel their sale at the prices fixed. Almost imme- 
diately there was a great outcry, for no goods 
were brought to market. The commissions 
were revoked with this significant comment: 
"We can not induce men to accept 6 d. for a 
shillings-worth. ' ' We tried a similar experi- 
ment during the American revolution. So did 
France under the Directorate. Neither was 
successful. Today we seem to be succeeding — 
not because we have power to fix prices but be- 
cause the government controls transportation. 
England controlled the price of corn during the 
Napoleonic wars by excluding foreign grain 

[74] 



MINIMUM WAGE 

from its ports. The effect of our interference 
has been not to put prices down but to put them 
up. We create a monopoly by restricting the 
supply. Under normal conditions prices are 
automatically adjusted. An advancing price 
tends to stimulate production, and increased 
production tends to lower prices. To require 
a man to sell for less than cost is to stop pro- 
duction and inflate the price. The object of 
trade is mutual benefit, and he who robs it of 
its reciprocal advantage kills it. Price-fixing 
results in wrong to one or other, producer or 
consumer; and that wrong can not be long 
endured. If some are so enriched, others must 
suffer a corresponding loss. 

Laws prescribing minimum wages hurt the 
very people whom they are designed to help. 
If an employee can not earn what must be paid 
him, no one will give him work, and he is 
denied the right to earn what he can. We 
remedy what seems to be an injustice in one 
case by inflicting a wrong in another. That 
we can not at once require an employer to give 
work and a minimum wage, ought to be evident. 

[75] 



EFFECTS OF FOLLY 

Where a miner can or will produce coal worth 
one dollar only, no one can afford to hire him 
for two dollars. 

Tampering with Economic Law 

The infirmity which afflicts the social re- 
former is ignorance of the nice balance main- 
tained by economic law between supply and 
demand — labor and its recompense — service 
and property. He is disposed to deprive Peter 
of something in order to help Paul. If he knew 
how and would teach Paul to help himself by 
helping others, many of the mischiefs which 
now afflict us would cease to do harm. I must 
admit that there are situations which seem to 
require drastic remedy, all laws to the con- 
trary nothwithstanding ; yet even in such in- 
stances, unforseen and injurious consequences 
are apt to follow. 

Lysis, a famous orator, persuaded the Greeks 
two thousand years ago to punish the corn 
dealers because they had raised prices. His 
argument, stripped of tinsel, amounted to no 
more than this : if you wish cheap corn, punish 
these men with death. They were executed, but 

[76] 



PROTECTION 

the price of corn advanced. If in time of famine 
provident men who expect calamity and take 
proper precautions, be treated as malefactors, 
none will dare to do what the general welfare 
requires. 

It is easy to disturb the intricate and compli- 
cated methods whereby goods useful to the 
community are provided and distributed under 
a system which originated in and depends upon 
experience rather than reason. The reciprocal 
play of powerful influences operating upon all 
is more trustworthy than any cunningly devised 
expedient of speculative philosophy. The inno- 
vator is more apt to hurt than to help. 

Protection 

Of all the evils which have retarded the pros- 
perity of mankind, none is more remarkable 
than that which is disguised under the bene- 
volent mask of protection. The word is of 
modern origin, but the pretence is old. Selfish 
men, benevolent philanthropists, misguided 
statesmen, busy-bodies comprehending nothing 
but eager to follow another's leading, and ig- 
norant workers striving to get more than they 

[77] 



PROTECTION 

deserve, have confederated throughout the ages 
to support a body of doctrine plainly antag- 
onistic in its actual operation to the very in- 
terests which it pretends to promote. Protection 
always involves an essential evil: it "protects" 
the consumer of goods against the goods. We 
have divided or specialized the labor of the 
world in order that it may be more productive, 
and have induced the production of the right 
articles by making every specialist depend upon 
the exchange value of his own goods. So only 
can he be induced to produce what another 
needs. To interpose an obstacle between them 
and the gratification of their desires can not 
protect either; yet the doctrine is founded on 
such an expedient. 

It is unnecessary to trace the history of this 
remarkable heresy. It had its origin in the 
paternalism of the old systems of government. 
The tyrant, king or emperor found it hard to 
trust any intelligence save his own and that of 
the parasites who surrounded him. Even under 
the Republic, Rome thought it necessary to 
compel every man to follow the calling of his 
ancestor, under the delusion that if industry 

[78] 



MONEY AND TRADE 

were free men would not do what the general 
welfare required. Guilds and monopolies were 
the curse of the Middle Ages. Native manu- 
facturers, feeling the stress of foreign compe- 
tition, found it easy to induce impecunious 
rulers to levy taxes which had the effect of 
embarrassing importations. Private cupidity 
and public need undoubtedly originated the pro- 
tective system. When, by the growth of com- 
merce the enrichment resulting from foreign 
trade had become evident to many people, the 
restiveness of the merchants under hampering 
restrictions was allayed by an ingenious argu- 
ment which they found it hard to resist. 
"What," said the advocates of protection, "is 
the object of trade: is it not to convert goods 
into money? If this be its object, then that 
trade which brings money in is profitable and 
that which drives it out is unprofitable. We 
should therefore encourage exports and dis- 
courage imports. ' ' As a result of such specious 
reasoning, the mercantile policy, as it was 
called, became firmly established all over 
Europe and obtained until recently even in 
England. 

[79] 



ORIGIN OF PROTECTION 

Origin of Our Protective System 
The American colonists, ignorant perhaps of 
the argument, were soon induced to adopt it by 
a series of events resulting in great local dis- 
comfort which they were unable otherwise to 
explain. Starting from the old country, they 
converted their wealth into its most portable 
form, and instead of bringing bulky goods 
brought specie. Money of course had little 
value in a wilderness, and in a short time was 
sent home to purchase the goods needed. Incon- 
venience was the natural result of such exporta- 
tion. Domestic trade needed a medium of 
exchange and measure of value. Ignoring the 
influences which induced the outflow of specie, 
the settlers adopted the expedient of paper 
money, and inconvertible paper money as we 
now know will drive out of circulation and keep 
out all money having intrinsic value. The 
troubles which followed led foolish men to 
attribute the mischief to the importation of 
goods, for goods imported had to be paid for, 
and as the Pilgrims lacked commodities they 
were compelled to send specie. 

A century and a half of incessant embarrass- 

[80] 



AMERICA AND PROTECTION 

ment did not afford the instruction requisite for 
the adoption of the proper remedy. The first 
act passed by the Congress of the United States 
was directed against foreign goods, and after a 
while a remedy for the evil was found, not by 
the wit of man but in the consequences of that 
gradual industrial development which attended 
the growth of the settlements. Fishermen sold 
salt cod in the West Indies for silver, brought 
the silver home and thence it was exported for 
goods needed. In time domestic goods were 
used for a like purpose ; and gradually, but only 
after a long period, was commerce put on a 
right basis. Not even then however did men 
perceive the underlying principles of trade. 
Jealousy of imports had become an established 
tradition; and long after they had ceased to 
result in special inconveniences selfish men 
found it easy to appeal to and profit by the 
general prejudice. Today in America that tra- 
dition is still firmly established. The argument 
for it has been modified to secure and retain 
votes enough for its support, but its prosperity 
rests upon the old prejudice. Manufacturers 
now say they need protection not for themselves 

[81] 



ENGLAND AND FREE TRADE 

but for their workmen, and pretend that high 
wages are the results of high duties. This im 
teresting pretension is now part of the eco- 
nomic gospel of the country. 

England's Emancipation 

Perhaps the best way to dispel it is to trace 
the emancipation of the English people from a 
similar delusion. Until the beginning of the 
19th century England was governed by the 
country gentry. Agriculture was presumed to 
be the foundation of its prosperity, and to pro- 
tect agriculture the importation of corn was 
restricted or prohibited. Adam Smith had long 
ago pointed out the iniquity of such restrictions, 
but his book had not yet become orthodox. Pitt 
having read it and been convinced by it, forced 
through Parliament a law emancipating Irish 
commerce from prohibitions imposed for the 
presumed benefit of the English ; but the Irish 
parliament rejected the boon. In the early part 
of the 19th century, Cobden began his famous 
agitation for the repeal of the corn laws. He 
was a manufacturer of cloth, who found his 
markets greatly curtailed by imposts which not 

[82] 



COBDEN'S ARGUMENT 

only reduced his profits but raised the cost of 
living to his operatives. His attempt met with 
violent and contemptuous opposition. Per- 
ceiving the difficulty of convincing the landed 
aristocracy, he set himself to the instruction of 
the people and after a long, arduous and 
dangerous campaign, so far succeeded as to 
provoke the serious attention of statesmen. 

The argument which prevailed was extremely 
simple. To the farmer he said, Why do you 
work; how much corn do you produce by your 
labor; what do you sell it for; what are your 
wages ? When men admitted that they worked 
to produce corn, and produced by very hard 
work about seven bushels to the acre, and sold 
it at a price which realized for themselves about 
8 shillings a week, he said to them : Leave your 
fields ; come into my factory, produce cloth and 
I will procure for you twice as much corn and 
pay you twice your present wages, provided 
you will help me to repeal the law which now 
keeps you poor. The argument was striking — 
and incredulity yielded to faith when he ex- 
plained that cloth made in England might be 

[83] 



STRUGGLE 

exchanged for more American corn than could 
be produced in England by twice the labor. 

Opposition to Cobden 

Cobden 's campaign was helped by the misery 
and discontent which followed the waste of the 
Napoleonic wars, but even suffering and riot 
failed to disturb the stupid serenity of the land 
owners. Their profits seemed to depend upon 
the exclusion of corn, and they could not under- 
stand how any man could be discontented so 
long as the gentlemen of England flourished. 
One man however, of first rate ability and 
great power, was convinced. He brought in a 
bill to repeal the corn laws, availing himself of 
an Irish famine to overcome opposition, and 
passed it through a reluctant House of Com- 
mons. Almost immediately prosperity began to 
revive. Even the land lords were enriched in 
spite of themselves. Having to compete with 
foreign corn, they improved their methods and 
increased the yield of corn fourfold. The pros- 
perity of all classes, notwithstanding the inno- 
vation, led to the investigation of the principles 
of political economy — the usefulness of trade 

[8 4 ] 



BALANCE OF TRADE 

and the harm resulting from hindrances to the 
exchange of commodities; and after a time all 
protective laws were swept aside by the rising 
tide of enlightenment. 

America seems to have been untouched by 
the new doctrine. While England was busily 
engaged in emancipating its commerce, the Con- 
gress of the United States was forging chains 
for its restraint. I have been unable to find any 
echo of Cobden 's agitation in any contemporary 
American publication. The index to McMaster 's 
History of the People does not contain Cobden 's 
name. Webster's great speech in advocacy of 
free coal for Massachusetts industries was fol- 
lowed by an equally great speech in which he 
supported Clay's policy of exclusion; but in 
neither does he refer to Cobden or Bright. 

Balance of Tkade 

This remarkable fact requires explanation. 
Perhaps the remoteness of England and the 
difficulty of communication shut us off from 
even the most important events in its experience. 
I incline however to believe that we were too 
much occupied by internal affairs to understand 

[85] 



FAVORABLE BALANCE 

even so significant a revolution as the repeal of 
the Corn Laws. Specie was still scarce among 
us. Paper currencies prevented its use. Always 
in want of specie, we attributed its loss to the 
importation of goods. That jealousy of foreign 
goods had its origin in this error, seems to be 
established by the persistent use of the phrase 
"adverse balance of trade' ' and the care with 
which we have always guarded domestic trade 
against all restraints. The absurdity of the 
phrase can not be exaggerated. What is trade? 
Is it not the exchange of goods for goods ? Can 
the balance be "favorable' ' when more are ex- 
changed for less? Was the balance "favorable" 
throughout that long period of time during 
which we constantly exported more than we 
imported? The fantastic notion that a balance 
of trade can be either favorable or unfavorable 
is hard to understand. Our excess of exports 
indicates no more than that as a debtor nation 
we have shipped goods for goods and also goods 
to pay interest on what we have borrowed. We 
made a profitable use of England's capital and 
sent abroad her share of the benefits realized. 
England's imports have been greater than her 

[S6] 



ADVERSE BALANCE 

exports for a century, yet she has lost no money 
by reason of this " adverse' ' balance of trade. 
Throughout the period she has been the money 
market of the world. How can this fact be 
reconciled with the prevailing delusion? Eng- 
land has become rich because her income has 
been greater than her outgo — not in money but 
in goods. The United States has also been 
prosperous — although her income in goods 
was less than her outgo. Both are better off. 
She enriched us with her capital, we her by 
paying interest for its use. The balance has 
always been even. 

I know that under certain circumstances what 
is called an " adverse' ' balance of trade must 
be corrected by the export of money, but why, 
under such circumstances, do we use money and 
no other commodity? Is it not because it is 
more advantageous to pay in money than in 
goods? How can that be properly regarded as 
* ' adverse ' ' which is profitable to us ? In a great 
emergency such as confronted England at the 
outbreak of the war in 1914, she needed goods 
immediately which could not be paid for with 
goods, and naturally and instinctively sent to 

[87] 



BLUNDER OF ENGLAND 

us a flood of gold. The mistake she made was 
not in using gold to get what she needed more, 
but in her estimate of her needs. All the gold 
in her coffers could not pay for half the goods 
needed. Vaguely apprehensive with respect to 
her own currency, she made a grave blunder at 
the start and attempted to check the outgo of 
gold, not by restricting her buying, but by re- 
stricting its export. The result of her folly 
was a great rise in the cost of what she needed. 
Her trade became " adverse' ' to her not in the 
conventional sense, but in the sense that her 
immediate needs could not be satisfied by her 
ready resources. As soon as she understood 
her predicament, she adopted the right exped- 
ient, and trouble was averted. Buying on 
credit, she retained her gold and her goods. 

No one need ever fear an ' ' adverse ' ' balance 
under normal conditions. Gold is never ex- 
ported unless it is advantageous to do so. No 
disaster should follow. If its export results in 
inconvenience at home, that is, if gold become 
scarce at home, its purchasing power will rise 
and the direct and necessary result of such 
advance will be to draw gold from abroad. 

[88] 



COST OF PROTECTION 

Money seeks its best market as instinctively as 
wheat or any other commodity, and it is incredi- 
ble that it shall be long lacking in that country 
where it will buy most. 

Lincoln's Blunder 

I have discussed the current delusion with 
respect to the "balance of trade" because it 
aided in the establishment of our protective 
system and lies at the root of much foolish 
thinking with respect to the nature of trade. 
Lincoln's hat story, already referred to, affords 
an illustration of the use made by protectionists 
of the delusion. Turning now to protection, we 
are confronted by an anomaly which demands 
explanation : we emancipate domestic trade and 
protect against foreign trade. Why! The ad- 
verse balance of trade notion being out of the 
way, what other delusion induces us to do so 
absurd a thing as to hinder our foreign markets 
for goods by restricting their exchange for other 
goods 1 

Burden of Tariff 

There are various answers. Some people 
have a notion that the foreigner pays the duty, 

[89] 



ARGUMENTS FOR PROTECTION 

and therefore approve a policy which relieves 
themselves from taxation. Let us consider this 
error. I, a farmer, take my wheat to its best 
market, Liverpool, and exchange 100 bushels 
for a suit of clothes. When I arrive at New 
York, the government compels me to pay $60 
duty upon the goods. What foreigner pays the 
tax? If I assume that the suit is sent to America 
and here exchanged for my wheat, must I not 
pay in wheat 100 bushels plus the duty! By 
what motive can the foreigner be induced other- 
wise to sell in America f Moreover, the dictum 
that duties add to the price which must be paid 
by Americans for foreign goods is the very 
foundation stone of protection. Domestic 
goods, it is assumed, should not be compelled to 
compete in price with foreign goods ; and such 
competition is overcome by loading foreign 
goods with the duty: that is, raising the cost 
of them to the American consumer.. 

The arguments for protection are too various 
for discussion. None of them proceed upon 
any intelligible, economic principle. Adam 
Smith has never been understood here. His 
doctrine was rejected even in England for fifty 

[90] 



DOMESTIC TRADE 

years. Obscured perhaps by national jealous- 
ies, it made no progress anywhere. France 
rejected Turgot and admired Colbert. Every 
nation was obsessed by the mercantile delusion 
that trade is profitable to the seller alone. None 
perceived the reciprocal advantages of a free 
exchange of the products of a divided and diver- 
sified industry. The American colonies were 
jealous of each other. Local imposts and re- 
straints upon trade among the members of the 
Union were surrendered reluctantly — not be- 
cause men perceived them to be injurious, but 
because they felt the kindling emotion of a com- 
mon cause and a common victory. What they 
imposed upon themselves, as if in mutual sac- 
rifice, they refused to allow to other nations. 
Today, as a result of that sacrifice, we have 
free trade among 100,000,000 of people widely 
separated and variously occupied, which we 
scrupulously defend against every encroach- 
ment; yet we as jealously prohibit the obvious 
benefits of such trade between ourselves and 
millions of foreigners more variously occupied 
and therefore more necessary to ourselves. 



THIERS' BLUNDER 

Thiers' Blunder 

A startling fallacy like Lincoln's seems to be 
most influential with the crowd. Thiers when 
asked why he imposed certain duties on imports, 
said "I wish to see the chimneys of France 
smoke.' ' His banality staggered his enemies, 
delighted his friends and won an instant vic- 
tory. Nevertheless the connection between a 
smoking chimney and a duty on imports is ob- 
scure. The implication contained in the retort 
is of course false: one may make a chimney 
smoke by burning very precious wealth. A 
smoking chimney is not an end of itself: we 
consume coal to produce wealth of greater value. 
The real question, whether by burning coal we 
create such greater value, is smothered by the 
smoke. It can not be worth while to burn coal 
to make at an expense of one dollar what we 
can buy for fifty cents. 

That the American policy was not a reasoned 
policy is evident if we consider that trade can 
not be beneficial as between Maine and Cali- 
fornia and at the same time injurious as between 
Maine and Canada: excellent east and west, 
criminal north and south. The original argu- 

[92] 



INFANT INDUSTRIES 

ment for infant industries was perhaps plaus- 
ible a hundred years ago, but why after a cen- 
tury of fostering do those same industries now 
need a far greater degree of protection than 
that which sufficed for their establishment? 
Having searched diligently, I can find no satis- 
factory ground for what Clay proudly called an 
American policy but the prejudices which were 
due to a peculiar experience from which we 
have never been emancipated by trial. America 
has always been prosperous in a general sense. 
Its resources were immense, its territory bound- 
less, and wealth was within the reach of every 
industrious worker. The petty restraints im- 
posed upon an inconsiderable foreign commerce 
did not prevent the free exchange of goods 
among ourselves. Because the protective sys- 
tem resulted in no distinct, visible and lasting 
harm, we have never tried to get rid of it. 

England was emancipated by a famine. We 
have had no famine. By reason of our good 
fortune, we have never been compelled to con- 
sider and understand the inconveniences and 
loss actually resulting from our blunder. We 
take for granted that a system which is not 

[93] 



PAUPER LABOR 

obviously injurious must be advantageous. How 
little reason is used with respect to the ques- 
tions involved appears in every political cam- 
paign. Orators tell us foolish things unabashed 
and unchallenged. One uses the balance of 
trade argument, another says the foreigner pays 
the tax; another says that infants one hundred 
years old must still be " protected,' ' and another 
that wages are high because goods are expen- 
sive. It is fruitless to discuss a question ob- 
scured by tradition and entrenched behind an 
inveterate habit. If I say that you can not make 
goods or wages or prosperity by law, none will 
attend. To point to the fact that men who 
"protect" Americans against the pauper wages 
of Europe import paupers, is to excite anger. 
Many men are enriched by protection. The laws 
compel others to pay them tribute. Their 
wealth is ill got. What one man produces by 
the sweat of his face, the law compels him to 
exchange for less than its worth in order to 
enrich another. If protection were not spolia- 
tion, it would be absurd. To protect A against 
B and B against A, involves a manifest absurd- 
ity. If I get more because another gets less, 

[94] 



BENEFITS OF FOREIGN TRADE 

and he gets more because I get less — what we 
each make we each lose, and so the protection 
is fatnous. 

Benefits op Foreign Trade 

Protection is wrong in theory and wrong in 
practice. We perform various tasks and there- 
by intend to help each other. We make to sell 
and buy to use. Our mutual welfare depends 
upon a just exchange of goods for goods. Pro- 
tection compels some of us to receive less than 
our goods are worth, and give to others more 
than their goods are worth. The farmer who 
can exchange 100 bushels of wheat for a plow 
in England is required to pay 150 bushels to an 
American — to what end? In order that the 
100 year old steel industry may be fostered into 
manhood, or that some Bohemian who can not 
speak English may get high wages, or that an 
adverse balance of trade may be avoided, or 
that plows — to use Mr. Harrison's impressive 
phrase — may not be cheap and nasty. 

Let me take a particular instance, now 
likely to excite prejudice, and examine the effect 
of protection upon trade with an enemy whom 

[95] 



THE CASE OF GERMANY 

we have every reason to dislike. Germany pro- 
duces dyes say for less than any other country: 
why should we "protect" ourselves against 
them? In order that we may learn to make 
them at greater cost? If we do not succeed in 
making them for less, is it not better to pur- 
chase them with other commodities which she 
needs? What harm can result? If we yield 
her a profit on her product, do we not get a 
profit on ours? By producing dyes at greater 
cost than we can buy them, we must lose the 
difference somehow. Germany can gain no 
more by selling than we by buying. Why should 
we prohibit such reciprocal service ? Should we 
not rather bind her to our service than pro- 
hibit her to serve us? The system which we 
have evolved as a result of experience rests 
upon the principle that it is advantageous for 
all that each should be induced to do that which 
each can do best. Protection induces men to do 
what another can do better, and thereby im- 
pairs the general prosperity. We can grow 
bananas under glass in Maine: would it be 
profitable to exclude the tropical fruit in order 
to establish such an exotic industry? 

[96] 



TAXES 

At the risk of being tedious, I have en- 
deavored to show the origin of the protective 
system, the fallacies by which it is supported 
and the actual derangement which it effects in 
that superior, natural and spontaneous system 
which we have found to be so advantageous. 
If trade be profitable to buyer as well as to 
seller; if the fruits of a divided labor can not 
be justly distributed without free trade between 
the various factors of wealth, then protection 
is a delusion and a snare. It restrains trade; 
it secures to special producers more for their 
goods than they are worth; it forces another 
producer to take less than his are worth. It is 
unjust and injurious and results in a private 
enrichment which is won by no corresponding 
service. 

Taxes 

Taxes invite consideration because people are 
not apt to understand the effect of such im- 
positions. They are levied by representatives 
of a majority who are prone to make them as 
heavy as possible under the delusion that taxes 
are paid by the rich. Let us consider a special 

[97] 



TAXES AND WEALTH 

instance. If the whole stock of corn amounts to 
1000 bushels, of which A owns 100, a tax on 
A's share seems to fall on A only; but it does 
not. A may intend to consume the corn or sell 
it. In either case the tax falls on the commun- 
ity. If he intends to consume it and it is taken 
from him, he must appropriate what he needs 
from the general stock; if he intends to sell it, 
its appropriation by the government diminishes 
the general stock. We find it hard to under- 
stand such effects because taxes are paid im- 
mediately in money, and only ultimately in 
goods. Where a millionaire pays $1000 into the 
public treasury, the money is disbursed in sala- 
ries and wages and we are apt to think such 
salaries and wages are paid by the millionaire. 
They are, in a sense, but not in effect ; for every 
employee who gets money from the public treas- 
ury immediately spends it for food, clothing 
and other goods. Who produces the goods? 
Not, according to the case assumed, the million- 
aire, for all goods must be produced by labor. 
If this be true, then all taxes fall ultimately 
upon the productive labor of the country, and 
however they be distributed, must ultimately 

[98] 



TAXES AND COST OF LIVING 

result in the appropriation of goods produced 
by labor. They always tend to diminish the 
general stock of goods. If a community pro- 
duces $10,000,000 worth of goods, and taxes 
amounting to $5,000,000 worth are gathered and 
consumed by the public employees, but $5,000,- 
000 worth will be left for the use of the workers. 
The heavier the tax, the harder it is for men to 
live. Particular industries may not immediately 
feel this effect, because prices advance as taxes 
are increased ; but nevertheless every producer 
is a consumer of goods and what he makes as 
producer he must lose as consumer: altho he 
may seem to get more, he in reality is getting 
less. An industrious German peasant who gets 
high wages may nevertheless, as a result of 
indirect taxation, starve to death. All taxes 
ultimately fall on the consumer of goods — no 
matter how they may be levied. The majority 
can not evade their share. Pay they must, 
somehow, soon or late, in meat, rent or labor. 
The inheritance taxes now imposed by federal 
and state governments involve an evil which 
must result in an impairment of the productive 
power of the nation. The assistance which 

[99] 



CAUSES OF POVERTY 

capital affords to labor has been fully discussed. 
It is indispensable to the general welfare that 
an adequate supply shall be provided and main- 
tained. Inheritance taxes, by appropriating a 
considerable part of the accumulations of every 
generation, impair the capital resources of the 
country, the efficiency of its industry and the 
prosperity of its citizens. 

That many foreign nations are poor is due 
more to a lack of the capital requisite for in- 
dustry than to any other cause. They save 
little and have not enough to invest in tools, 
machines, railroads and other facilities for pro- . 
duction and distribution. Back of every inheri- 
tance tax is the communistic notion which tends 
always to equality in poverty. 

I have discussed these various expedients 
whereby clever men have attempted to evade or 
hinder the operation of economic influences, in 
order to emphasize the value of those influences 
— the good they accomplish and the evils they 
tend to mitigate. Restricted output, combina- 
tions to raise prices, duties on imports, taxes 
however imposed, tend to impair the purchas- 
ing power of labor and to withdraw from the 

[IOO] 



SUMMARY 

laborer that just share of the common wealth 
which his industry deserves. Ingeniously, cun- 
ningly and always oppressively, selfish men 
have contrived and schemed to escape the eco- 
nomic law. They may succeed for a time, with 
the aid of unjust and injurious legal devices, 
but always the economic law tends to restrain 
and correct them. The free, spontaneous sys- 
tem evolved by the experience of mankind, is 
wiser, juster and more beneficial than any con- 
trived by the deliberate purpose of any man, 
however able. We are constantly interfering 
with its operation, but can never quite succeed 
in defeating the salutary restraints which it im- 
poses, the good which it compels. 

Summary 

We have now traced the organization of 
industry from its origin through the various 
stages of its development, to the complicated 
but admirable system which is now firmly es- 
tablished. Founded upon the natural desire of 
every man to help himself, it has resulted in 
a harmonious cooperation whose guiding prin- 
ciple is mutual service. Selfishness has not 

[IOI] 



SUMMARY 

ceased to be influential, but it has ceased to be 
harmful, for every man's private welfare is so 
firmly yoked to that of his fellows that strive as 
he may he can not emancipate himself. The 
labor of each is a specialized labor. No one 
consumes what he makes. Making for another 's 
use, each must make what another needs in 
order that he may get what he himself wants. 
Actuated by selfishness, men have become cun- 
ning and zealous in mutual service. Labor is 
free, but not absolutely so : it is free to do good 
but not to do harm. 

Trade enriches all who engage in it. Neither 
party can thrive at the expense of the other. 
Each gets what he needs in exchange for what 
he wants, but neither gets more than he gives. 
And so the increasing products of a divided 
industry are distributed justly and ratably 
among the various factors of wealth. 

Vaguely perceiving the mutual advantages of 
trade, we have emancipated it from restraints 
and provided ingenious facilities for conduct- 
ing it, such as money and markets. To enlarge 
the benefits resulting from it, we have encour- 
aged a class who devote themselves to search- 

[102] 



SUMMARY 

ing out the resources and wants of remote com- 
munities, and by their aid the fruits of the fields 
are brought to the doors of the manufacturers 
and the products of the factory to the doors of 
the farmer. Distant countries have been in- 
vaded and explored and their greatly diversified 
products made to contribute to our prosperity 
and theirs. 

To another class we have entrusted the busi- 
ness of transportation, and by its aid the cost 
of moving goods has steadily declined until now 
it is one-tenth or one-twentieth of what it was 
half a century ago. 

Still others provide the capital required for 
machines, highways, ships and trade. We have 
induced saving by rewarding it, and now mil- 
lions pour the fruits of self-denial into the 
coffers of the banks, which in turn direct their 
investment or use for purposes profitable to 
the community. 

These things free men have accomplished by 
themselves, unaided and uncompelled, under a 
spontaneous, natural system which has resulted 
in the enrichment of the world. At its basis, 

[103] 



AN ASPIRATION 

affording a sure and firm foundation, is one 
notion, one principle, one fact : what a man earns 
is HIS. We allow the laborer his hire; the 
employer his profit; the capitalist his share of 
the wealth which he has helped to create and 
distribute. Take away this wage, this profit, 
this interest, and the whole structure crumbles 
away. Disturb the spontaneous and just dis- 
tribution of the rewards of service which men 
freely render to each other, and you rob them of 
a motive to mutual service and imperil industry. 
If some get rich, it is not because others remain 
poor. Riches is the servant of the people; 
property is the best friend of labor. 

An Ideal Era 

We have a country rich in natural resources ; 
an energetic and ingenious people; capital in 
abundance ; every hand at work among us con- 
trols the energy of five; goods were never so 
easily produced; there is no limit to the pro- 
ductive capacity of men, and none to their de- 
sires. Why are we not all rich? Goods are 
riches. We can produce as many as we wish. 

[104] 



UTOPIA 

We now deliberately produce few, save under 
those rare conditions of feverish prosperity 
which can not endure. Let me assume what we 
have never observed — that every employer 
knows his business ; that his credit is good be- 
cause deserved; that capital is abundant; that 
he is emancipated from all foolish restraints, 
commands the best machinery known to the 
craft and is surrounded by skillful workmen 
eager to assist ; that all other industries are as 
well managed and as well equipped; and that 
trade is free ; — what should be the consequence? 
Will not goods be abundant and fabulously 
cheap, and will not each get his share ? Goods 
are made for consumption, and the workmen 
constitute nine-tenths of the population. It is 
they who consume nine-tenths of the wealth. 
Every increase in product necessarily involves 
a corresponding increase in the share of each. 
If those who need much or wish much will pro- 
duce much, they can not fail to thrive. Each 
depends upon the other, and upon the cordial 
and unrestrained cooperation of all classes 
depends the welfare of all. 

[105] 



DERANGEMENTS OF INDUSTRY 

Over-Production 

Today we fear over-production, as if it could 
be an evil to have many goods of the right 
sort. What we should fear is dear goods, or 
goods of the wrong sort. Nothing tends so 
effectually to arrest trade as a gradual increase 
in the cost and price demanded for special 
goods. Cheapness is never an evil, provided 
all goods be cheap at the same time. If how- 
ever the makers of one sort of goods demand 
more in exchange for them than they are worth 
to the community, trade in those goods must 
cease. Cheap goods of the right sort will 
always find a ready market. We must never 
forget that ultimately wages, profits and 
interest must be realized in goods and not in 
money, and that where goods are cheap the 
rewards of all enterprise and all service are 
correspondingly high. An unrestrained trade 
in cheap goods is the economic ideal for which 
all should strive, for such a trade affords abso- 
lute assurance that the right goods are being 
cheaply produced and justly distributed. 

The resentment which men feel when others 
thrive is a foolish sentiment, unwise and un- 

[106] 



JAMES HILL 

generous. If property is the result of service, 
none should envy it. Not even the greatest 
fortune is to be feared. Where it has been 
earned it will be wisely used. There are among 
us men of affairs and genius who have become 
benefactors of millions, and their fortunes are 
fabulous because their service to their fellows 
has been incalculable. 

Case of James Hill 

James Hill of Minnesota died worth fifty 
millions of dollars. He first made money by 
dealing in wood. In the course of that business 
he became familiar with problems of transpor- 
tation, and bought a steamboat. Later he got 
control of a bankrupt railroad, and its business 
required him to penetrate and explore its terri- 
tory. He traveled constantly and discovered 
a great and resourceful region lying along the 
northern border of the United States which had 
never been developed. He undertook its devel- 
opment. His first problem was to secure capital 
enough for the enterprise. He encountered great 
opposition. Those identified with the Northern 
Pacific Railroad regarded with suspicion an 

[107] 



JAMBS HILL 

undertaking which seemed to threaten an 
injurious competition, but Hill persisted. He 
made a careful survey of the country to be 
traversed, ascertained the number of acres 
available for cultivation and the extent and 
value of its mines and forests. He calculated 
the cost of the railroad, the cost of operation 
and its probable income. In the course of time 
he convinced others of the feasibility of his 
enterprise, and secured the capital required. 
The road was constructed with the utmost care 
and economy. All possible routes were investi- 
gated, and that was adopted which cost least, 
allowed of most economical operation and prom- 
ised the greatest income. He caused the lands 
through which the selected route passed to be 
tested by experts, ascertained the number of 
acres which an industrious farmer might most 
profitably cultivate, selected his settlers and 
saw to it that they were properly stocked and 
equipped; he examined the markets at which 
various crops should be disposed of, and as- 
sumed the burden of transporting them at a 
charge which would allow of a profit to the 
farmer at such market. All of these various 

[108] 



JAMES HILL 

affairs he managed with the utmost ability. 
His road was well managed. He kept his cars 
full and moving. When business was lacking, 
he created it. Where the jealousy of his rivals 
interposed obstacles, he obviated them by bold 
and unexpected expedients. He was success- 
ful and made money for himself, his associates 
and the millions of men who settled by the way ; 
and he added to the riches and resources of 
his country the products of an immense area 
stretching from the Great Lakes to the Pacific 
Ocean. 

Is anyone disposed to think that Mr. Hil] 
did not earn his millions ? He was the benefac- 
tor of millions of men, and each freely ren- 
dered to him a trifling part of the wealth he 
helped to create and market. His railroad is 
still the servant of the people, its rates are 
deemed satisfactory to the public authorities, 
it is well operated and no one complains of its 
service. The tradition established by him still 
prevails, and because its service is excellent 
and the property is well and wisely employed, 
the road continues to prosper. Did not Mr. 
Hill earn and deserve the great fortune which 

[109] 



ABUSE OF WEALTH 

his sons inherited? How, in what manner, to 
what extent has his sons' ownership of the se- 
curities of the Great Northern Railroad Com- 
pany interfered with the general welfare 1 Who 
is worse off as the result of that ownership? 
The fortune left by Mr. Hill will be unprofitable 
to his heirs if it be not usefully employed. They 
can not devour their income. What they save 
swells the capital resources of the country and 
assists its productive and distributive indus- 
tries. They have been taught in a good school, 
and know how to employ capital. If they make 
a bad use of it, it will pass into other and more 
competent hands and ultimately enure to the 
advantage of mankind, since otherwise it can not 
be of value to its possessor. 

Abuse of Wealth 

The moderate estate, limited to the actual 
needs of an average family, however alluring 
it may be to the dreamy reformer who desires 
a beatific equality, will never provide more 
than the actual day by day wants of the people. 
We need more, more for war and more for 
peace; and if we need more, we should en- 

[iio] 



PROPERTY AND PROSPERITY 

courage its accumulation by rewarding those 
who make and save. 

I know that many make what is regarded as 
a base use of their incomes, but what use would 
you have them make of it? How can one man 
know the propensities and natural desires of 
another? What right has he to interfere with 
their gratification? What good will result from 
the impertinent interferences of one 's neighbor, 
who insists that I shall dress, eat and live as he 
thinks proper? However extravagant a man 
may be, there is a limit to the amount of wealth 
which he may devour. What he does not waste 
belongs in a real sense to the community, since 
it must be employed in its service. 

Property affords a basis not only for our in- 
dustrial system, but a solid foundation for what 
we call civilization, It affords leisure for that 
sort of thinking which tends to make people 
wise and that sort of refinement which tends to 
make them mutually agreeable, and that sort of 
culture which enables them to understand their 
fellows, and that sort of security which is indis- 
pensable to what we call happiness. 

Today we praise charity and affect to despise 

[in] 



PROPERTY VINDICATED 

the means by which it accomplishes its bless- 
ings. Who is more useful to the state — he who 
teaches ten thousand men to make an honorable 
livelihood by serving their fellows, or he who 
induces five hundred to submit to tender min- 
istrations of another's providing? Charity is 
exhausting; industry is productive. There is 
room for both in the world, but of the two in- 
dustry is more necessary, for charity must de- 
pend upon it. 

Vindication of Pkoperty 

I admit that property is abused, but so is 
every other human institution. There are mar- 
riages which are not delicious, religions that 
lack credibility, courts which can not under- 
stand law, doctors who disagree, lawyers who 
strive rather for victory than justice ; yet mar- 
riage, religion, justice and medicine should not 
therefore be condemned. We observe the 
flaunting ostentation of the vulgar plutocrat 
and assume that property, not himself, is to 
blame. We wrong property. As an institution 
it should not be condemned. If it is unequally 
distributed, so is ability, character and energy. 

[112] 



UNEQUAL DISTRIBUTION 

In inequality there is diversity and variety and 
mutual influence. If all men were alike, thought 
alike and lived alike, we should have nothing to 
say to each other. If men wished nothing, 
worked for nothing, could possess nothing save 
that average of goods allowed by the dreamer 
as enough for felicity, — what would become 
of the arts, crafts and industries of the world ; 
of its civilization and progress? Property 
affords a material basis for domestic happi- 
ness; it can not guarantee such happiness. It 
also affords a motive for industry, helpful 
machines and means of transportation; but it 
can not guarantee that all men shall become 
skillful and zealous and wise in the production 
of or use to which property may be put. Its 
tendency is to help, not to hurt; to help the 
poor as well as the rich. That it can not cure 
the infirmities of men should not be urged 
against it. What crimes have been committed 
in the name of religion! Is it therefore bad? 
Men condemn property, but none should incline 
to do so who understand human nature and the 
spur which property affords to the languishing 
virtues of mankind. It is a selfish institution, 

[«3] 



IRONY OF HALIFAX 

but so is marriage and the home. Men will 
work for their own wives and their own children 
and their own property, and they will not work 
so zealously for any other. If it is wicked to be 
so yet we are so and can not help it. We must 
deal with human nature as we find it, and while 
we are human, ' ' It will never be a natural thing 
for men to take extravagant pains for the mere 
sake of doing good to others. "Where a man 
can honestly propose nothing to himself except 
trouble, change and loss, to be violent in the 
pursuit of so ill a bargain is not at all suited 
to the languishing virtue of mankind so cor- 
rupted. Such self-denying zeal in such a self- 
seeking age is so little to be imagined that it 
may without injury be suspected. ' ' 

The irony of Lord Halifax will offend many 
good people. To these I venture to say: is it 
not possible that such resentment may be un- 
reasonable? Selfishness is natural in the sense 
that none are without it. Is it not a certain 
sort of hypocrisy to ignore human nature and 
pretend that it is otherwise than it seems ? Are 
not the church, the state and all other conven- 
tional institutions predicated upon the infirmi- 



ABUSE OF PROPERTY 

ties of men? Do men not need salvation be- 
cause they deserve condemnation? Are not 
laws and courts necessary because men are 
prone to crime and wrong-doing? Political 
economy predicates its doctrine on the same 
foundation. Why then should people who ap- 
prove the church and state denounce political 
economy 1 Its doctrine is not wicked, neither is 
it unjust nor unfair, nor in any way injurious 
to the commonwealth. It found men disposed 
to be free and useful to themselves. Finding 
them so, it observed and examined the conse- 
quences of these propensities and discovered in 
such propensities compensations which are 
most reassuring. It justifies private property 
because private property affords to selfish, 
free men a motive to mutual service, a sure 
basis for general prosperity, an aid as well as 
an inducement to industry. Its doctrine is not 
an apology for selfishness, however clearly it 
may demonstrate that guided by paramount 
influences selfishness has been made useful to 
the community. 

To denounce human nature may seem very 
great folly, yet to denounce selfishness will ever 

[US] 



ECONOMIC AND MORAL LAW 

seem most generous. Is it therefore that men 
so loudly complain of political economy and 
profess to hate that property which affords the 
firm basis of its doctrines? Selfishness is in- 
eradicable. Property is its effect, not its cause. 
If, like the church and state, philanthropy will 
allow what it can not deny, much of the foolish 
declamation which now afflicts us will be quieted. 
Selfishness of itself may be either good or bad 
as its consequences are so. A courage which is 
admirable in a good fight may actuate the 
footpad. A selfishness which affords a power- 
ful and constant motive to honorable industry, 
which induces a cordial and helpful cooperation 
and tends to a cheerful and intelligent mutual 
service should not be lightly condemned. 

Property itself can be neither good nor bad. 
It is a possession, a tool, a thing. One may 
make a good or a bad use of it. Would any 
man take a good tool from a good man because 
in the hands of a bad man it may be used mis- 
chievously? The church is not the cause of 
hypocrisy, yet hypocrites thrive within it. 
Should churches therefore be condemned? 

I have attempted to justify private property 

[116] 



SUCCESS AND FAILURE 

not as an end but as a means to an end which 
none can affirm to be dishonorable. That end 
is comfortable living under conditions which 
admit of what we call the higher civilization. 
I have not attempted to justify its abuse. I 
know that all men have not achieved that end, 
but if so, it is because some can not or will not, 
by reason of their infirmities of character. If 
many fail where few succeed, the trouble lies 
not in the success of the few but in the failure 
of the many. The few do not succeed because 
the many fail, nor do the many fail because the 
few succeed. If we destroy property, we will 
not help the many. Their prosperity depends 
upon the guidance of those who are superior 
to them in those faculties of which every com- 
munity has greatest need. If all must suffer, 
then great will be the disaster, for nothing is 
more true than that a common property in- 
volves a common misery and a common slavery. 
I trust the reader will pardon the reiterations 
of this brief essay. Prejudice is not easily over- 
thrown, and I have thought that what one blow 
may not accomplish, two may. The same argu- 
ment may have various aspects, one plausible 

["7] 



POSTSCRIPT 

to this man, another convincing to that. It 
can do no harm to say twice or three times the 
same thing, save to those who do not need to 
be convinced. I do not write for them, but for 
those less familiar with the refined considera- 
tions upon which economic doctrine depends; 
and I have tried to make common errors evident 
to those who are obsessed by them. 

Postscript 

In this essay I have attempted to prove that 
selfishness as a human impulse is so controlled 
by irresistible economic laws that we should 
not fear it. The events of the last year (1919) 
seem to have confuted my argument. Never 
before was there such general discontent, and 
that discontent seems to be the direct result of a 
relentless, pushing, industrious selfishness 
which puts aside all restraints in pursuit of 
gain. 

Nevertheless the argument is unshaken. Its 
apparent fallacy is not real. Selfishness is 
now a devastating influence because the war has 
for a time suspended the operation of the in- 
fluences by which it was formerly restrained. 

[118] 



ECONOMIC LAW AND FREEDOM 

The State has come between the producer and 
consumer of goods. Its power, much abused, 
has usurped the instrumentalities of commerce. 
It has taken over the railroads and ships and 
so interfered with the law of supply and de- 
mand that the stress of that law can not correct 
disparities which have day by day become 
enormous. The economic law depends upon 
freedom. It can not resist political tyranny. 
It is spontaneous in its operation and can not 
be consciously guided by calculating intelli- 
gence. What seems to the mind most injurious 
may in fact be most beneficial. High prices 
should stimulate production; the higher the 
price, the greater the stress, the quicker the 
response. Coal for example is today a regu- 
lated commodity. The government transports 
it ; its distribution depends upon those who care 
not at all for gain to be got by service ; no one 
has a motive to work zealously. Cars are want- 
ing ; delays in delivery are not punished by loss 
to the carrier. Competition can not correct 
bad service ; the price is fixed — the mine owner 
is not permitted to make a profit; wages are 
established by violence ; the mines are idle and 

["Pi 



CONSEQUENCES OF STATE CONTROL 

the consumer shivers in the cold. All of these 
evils are the immediate effect of injudicious 
governmental interferences. 

If the railroads had been free, competitive, 
and selfishly operated, if the price of coal had 
not been arbitrarily fixed, if proper protection 
had been guaranteed to all willing to work — it 
is inconceivable that we should not have had 
coal enough. Let us assume that it might have 
been sold for $20 a ton : what should have been 
the consequences of such a price f First, a gen- 
eral rise in miners ' wages ; 2d, a great increase 
in the number engaged in mining ; 3d, a rush of 
coal to the markets ; 4th, a glut of coal ; 5th, a 
declining market; 6th, a speedy return to nor- 
mal conditions. 

All of these consequences of freedom have 
been prevented by the pestering and afflicting 
interferences of various public officials acting 
under bad laws enacted during a war. The 
facts by which we are confronted, so far from 
invalidating the argument for freedom, confirm 
it and make but more evident the validity of the 
principles upon which it rests. Selfishness is 
a stimulating, useful influence only so long as 

[120] 



THE END 

it is left unrestrained to achieve its gratifica- 
tion by zealous service. Rob it of its incentive 
to serve, and its usefulness is gone. We have 
impaired its usefulness by restraining its grati- 
fication. Politics have usurped the function of 
economic law, and many of the evils which afflict 
us are traceable to the malign interferences of 
misguided political benefactors who, wishing 
good, know how to do harm only. 



[121] 



£ c - 2- 4> 




JSTINE 



32084 



